The pan-European STOXX 600 index closed with a slight increase of 0.16% this Thursday, in a session marked by caution due to the escalating conflict in the Middle East. Good corporate results failed to dispel geopolitical uncertainty.
The STOXX 600 rose 0.16% to 643.73 points, marking its third consecutive day of gains. However, optimism over corporate results was overshadowed by geopolitical tensions in the Middle East, which kept investors within a narrow trading range.
Insufficient corporate results to boost the market
Hopes that the earnings season would divert attention from geopolitics and focus it on corporate fundamentals have not materialised. Despite strong results from ASML, the leading supplier of chip-making equipment, the STOXX has barely risen 0.41% this week.
Shares in basic resources were the most lagging, with a decline of 1.38%. In contrast, shares in the media sector led the gains with an increase of 1.43%.
"What works in favour of Europe is that valuations are much more favourable. And that hasn't changed," said Randy Baron, portfolio manager at Pinnacle Associates.
Mixed tech stocks and declining semiconductors
Technology stocks remained stable, despite Taiwanese TSMC announcing a record 77% increase in its second-quarter profits. However, within the sector, ASML gained 3.16%, while STMicroelectronics and BE Semiconductor fell by 4.91% and 3.2%, respectively. The semiconductor sector shows signs of cooling after a strong streak in the previous quarter.
Nevertheless, investors remain hopeful that this will be the strongest earnings season in Europe in over three years. For individual investors, the key lies in more attractive valuations in the Old Continent compared to other markets, which could offer medium-term entry opportunities.
Next week, new results from major European companies are expected, which could provide a definitive boost if geopolitical conditions do not worsen. In the meantime, caution remains the dominant tone.
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