European stocks steady as strong earnings offset U.S.-Iran escalation

European equities closed mostly lower on Wednesday as an escalation in the U.S.-Iran military conflict sent oil prices sharply higher and a global technology selloff deepened, before trading cautiously on Thursday morning amid a flood of corporate earnings.

Oil Surge and Geopolitical Risk

The pan-European STOXX 600 fell 0.29% on Wednesday to 645.01, with Germany's DAX edging down and France's CAC 40 losing 0.6%. The UK's FTSE 100 bucked the trend, gaining 0.34%, buoyed by its heavy weighting toward energy and mining stocks.sharecast

Brent crude surged more than 7% to above $90 a barrel after Iran launched ballistic missiles at U.S. military targets in the Gulf, ending a recent pause in fighting and raising fears of prolonged supply disruptions. "A return to the US-Iran conflict seems baked in regardless of anything else that happens tonight," said IG chief market analyst Chris Beauchamp.sharecast

By Thursday morning, the STOXX 600 edged 0.1% higher as investors digested fresh U.S. airstrikes inside Iran alongside a wave of strong European earnings. The Federal Reserve's decision to hold rates steady on Wednesday, combined with Fed Chair Kevin Warsh's hawkish tone on inflation, added to the cautious mood.finance.yahoo+1

Tech Rout Deepens on AI Spending Fears

Technology stocks were the biggest drag on European indexes Wednesday after South Korea's SK Hynix ↘ 6.39% fell short of elevated investor expectations despite reporting a six-fold jump in quarterly profit. Semiconductor equipment maker ASM International dropped 8%, while South Korea's Kospi plunged 8.3%.wkzo+1

"The main concern is whether companies can deliver earnings that justify their high valuations," said Russ Mould, investment director at AJ Bell. On Thursday, Meta Platforms ↘ 0.41% added to jitters after reporting a 91% plunge in quarterly free cash flow, underscoring the cash burn required to fund AI infrastructure, while Microsoft ↗ 0.78% and Samsung delivered reassuring updates.finance.yahoo+2

Earnings Provide Partial Buffer

Strong corporate results limited losses. Kering surged nearly 17% on Wednesday after Gucci posted a smaller-than-expected sales decline. UBS ↗ 0.77% beat profit expectations and announced a $3 billion buyback, while Deutsche Bank ↗ 0.46% reported a 10% profit jump.wkzo+1

On Thursday, Shell ↗ 1.14% more than doubled its second-quarter adjusted profit to $9.8 billion, Schneider Electric jumped 7.3% after raising full-year guidance, and Societe Generale Société Générale S.A. posted a record quarterly profit. Adidas was the session's biggest loser, tumbling more than 15% on disappointing results.economictimes+2

Andrea Cicione, head of research at TS Lombard, summed up the market's predicament: "The reporting season is driving markets, but has been overshadowed by developments in the Middle East. Then there is general market weakness as investors remain quite nervous about capex in data centres, particularly related to AI".wkzo