Key insights
- European shares saw a modest rise as oil prices declined following a ceasefire agreement between Israel and Lebanon. However, market sentiment remains cautious due to Hezbollah's rejection of the deal and ongoing geopolitical tensions. Investors are focused on the European Central Bank's upcoming rate hike, signaling a priority on inflation control over growth concerns. The tech sector experienced a downturn, influenced by Broadcom's weaker-than-expected revenue, while defensive sectors gained traction.
By Johann M Cherian, Utkarsh Hathi and Ragini Mathur
June 4 (Reuters) - European shares rose on Thursday as oil prices eased, although investors remained cautious on whether the latest developments in the Middle East would lead to a durable peace deal.
Brent crude futures fell 2.8% to $95.06 a barrel after Israel and Lebanon agreed on Wednesday to implement a ceasefire.
However, hopes for a broader de-escalation were tempered after Hezbollah rejected the deal and Israel said it would not withdraw troops from Lebanon, complicating U.S. President Donald Trump’s efforts to forge a peace deal with Iran.
Investors were looking for firmer evidence that a breakthrough was possible after several failed rounds of talks.
The pan-European STOXX 600 finished 0.5% higher at 624.45 points, led by gains in healthcare with French biotech Abivax jumping 17.8% and rebounding from losses earlier in the week.
The STOXX 600 remained on track for a marginal weekly decline, with the Strait of Hormuz, a key global oil-shipping route, still mostly shut.
Persistent price pressures have led markets to price in a 25-basis-point rate hike by the European Central Bank at next week’s meeting, according to LSEG data.
"The well telegraphed policy hike coming next week reveals a preference for curbing upside inflationary risks rather than addressing downside growth risks," said a group of macro analysts led by Rune Thyge Johansen at Danske Bank.
"We expect (Christine) Lagarde to keep full optionality on the future policy rate path, including a potential second summer hike," Danske Bank’s analysts added.
Chip stocks eased, with Infineon Technologies and STMicroelectronics down 3.4% and 2.6%, respectively, after U.S. chipmaker Broadcom reported lower-than-expected second-quarter revenue.
"Europe’s lack of heavy exposure to technology has hurt it in the past, but today it is helping, because investors are rotating away from tech and toward defensive, value-oriented parts of the market," said Steve Sosnick, chief market analyst at Interactive Brokers.
Software and IT stocks extended a recovery from a sharp selloff over AI disruption concerns. Capgemini, Nemetschek, Dassault Systemes, SAP and Sopra Steria rose between 6.39% and 8.79%.
Shares of British financial firms with exposure to China fell after Chinese media reported mainland residents were facing tighter restrictions on opening offshore accounts at major Hong Kong banks. HSBC, Standard Chartered and Prudential declined between 1.8% and 7.6%.
Among individual movers, Remy Cointreau rose 9.8% after its CEO Franck Marilly laid out a three-year turnaround plan and said the drinks group aimed to boost operating profit by around €100 million ($116 million).
Puma shares gained 4.5% after Citigroup raised its rating to "buy" from "neutral".
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