European shares slip as tech rout offsets earnings support

European equities slipped on Thursday (Oct 15) as a global decline in AI-related stocks, driven by concerns about rising borrowing costs, dampened risk appetite, while positive corporate announcements countered some of the losses. The pan-European Stoxx 600 index slipped 0.16 per cent to 636.73 points by 0901 GMT. Regional stock exchanges were mixed, with French, British and Spanish equities experiencing gains.

Tech shares worldwide were hit hard after US inflation data on Wednesday fueled fears of additional Federal Reserve rate hikes, impacting companies that fund AI infrastructure build-outs through debt. Michele Morganti, senior equity strategist at Generali Investments, noted the ongoing pressure from Consumer Price Index (CPI) data, likely sparking more caution around long-duration stocks, particularly in the tech sector, and their financing requirements.

The technology sector plummeted 2.7 per cent, on track for its steepest single-day decline since July, highlighting its sensitivity to AI sentiment fluctuations. Chip manufacturers Infineon, Soitec, and Aixtron saw declines ranging from 6.3 per cent to 7.5 per cent, while ASML, a chip equipment maker, dropped 4.8 per cent. Electronics equipment firms Legrand and Schneider Electric, traditionally viewed as beneficiaries of data center spending, fell 3.4 per cent and 3.8 per cent, respectively.

Investors also scrutinized corporate updates from leading European firms. Ericsson rose 8.3 per cent following the telecom equipment maker's release of weaker-than-expected third-quarter core profit and beating analyst forecasts for third-quarter net sales, boosting the telecom sector by 1.9 per cent. Pernod Ricard gained 1 per cent after reporting a slight 0.9 per cent drop in sales for the first quarter of its 2027 fiscal year, which surpassed expectations.

Mondi, however, plunged 10.8 per cent after announcing price hikes for several paper grades to counter energy and raw material cost hikes. Antofagasta fell 6.2 per cent after reporting a 8.3 per cent year-to-date decline in copper production, coupled with weaker copper prices, dragging the mining sector down 2.5 per cent. Brent crude oil prices dropped over 2 per cent on Thursday, providing some relief to energy-intensive Europe.

Traders continue to gauge an 84 per cent likelihood of a quarter-point European Central Bank rate hike in December, following two earlier rate hikes this year to combat inflation stemming from higher energy costs. The focus will also shift to French September CPI data and eurozone industrial production figures later in the day.