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European shares drop as chipmakers, Mideast fears weigh

Published 18/10/2023, 08:20
© Reuters.
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By Amruta Khandekar and Shristi Achar A

(Reuters) -European shares fell on Wednesday, dragged by a drop in shares of chipmakers and British drugmaker AstraZeneca (NASDAQ:AZN), while increasing concerns over an escalation in the Middle East conflict further weighed on sentiment.

The pan-European STOXX 600 index was down 1.1%, its lowest level in over a week.

A strike on a Gaza hospital that killed hundreds of Palestinians raised the stakes for U.S. President Joe Biden's visit to Israel.

ASML Holding (AS:ASML) lost 3.4% as the semiconductor equipment maker reported lower-than-expected orders and warned of flat sales next year.

Shares of other chipmakers such as ASM International, Aixtron and BE Semiconductor also shed between 0.8% and 4.5%, dragging Europe's technology sector down 2.2%.

"Today, the disappointing (semiconductor) results are going to be the one dominating the news because it's a big and important sector for Europe," said Anthi Tsouvali, multi-asset strategist at State Street (NYSE:STT) Global Markets.

"In general, earnings expectations remain high and they seem to be very optimistic for a region which is an energy importer. If energy prices continue to climb higher, that's going to be an issue."

The burgeoning uncertainty over the Middle East war, a slew of mixed earnings reports and a jump in bond yields after better-than-expected U.S. economic data have kept European shares under pressure this week.

The Euro STOXX volatility index hit its highest intra-day level since March.

Shares of AstraZeneca shed 5.8% after a data abstract on its experimental precision drug's use in lung cancer patients in a late-stage trial disappointed some analysts.

Adding to the declines, data showing hotter-than-expected British consumer inflation pushed the FTSE 100 down 1.1%.

The energy sector was the only gainer among major sectoral sub-indexes, up 0.3% as risks to supply from the Middle East boosted crude prices. [O/R]

Basic resources led losses among the sectors, down 2.7%, dragged by 3.9% drop in ArcelorMittal as Bofa downgraded the world's second-largest steelmaker to "neutral" on waning demand.

Industrials were a big drag, down 2.0% with ABB dropping 6.5% after the Swiss engineering group dampened expectations for the fourth quarter.

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 16, 2023.    REUTERS/Staff/File photo

Among other stocks, Adidas (ETR:ADSGN) added 3.2% after the sportswear firm lifted its revenue forecast and cut its expected loss for 2023. The upbeat outlook also lifted shares of rival Puma by 1.5%.

Italy's Nexi (BIT:NEXII) jumped 13.2% to the top of STOXX 600 after a source close to CVC Capital Partners said a potential bid for the payments firm is one of several options being studied.

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