Europe stocks drop as weak China data and Middle East tension outweigh ASML
Europe’s major stock indices fell today as sluggish Chinese economic growth and rising oil prices overshadowed a massive forecast upgrade from ASML, the continent’s most valuable company.
The FTSE 100 dropped 0.78% to 10,446, while Germany’s Dax fell 1% and Spain’s Ibex lost almost 1%. France’s CAC slid 0.3% and Italy’s MiB lost 0.7%. The broad losses came even as Dutch tech firm ASML jumped 5.7% after releasing second-quarter results that shattered market expectations.
ASML raised its full-year net sales forecast to between €43bn and €45bn, up from a previous range of €36bn to €40bn. Second-quarter sales climbed to €9.3bn and net profits reached €2.9bn. Chief executive Christophe Fouquet attributed the demand to ongoing AI-related investments and progress in AI technologies.
"Our order intake remained extremely strong in the first half of the year," Fouquet said. Matt Britzman, senior equity analyst at Hargreaves Lansdown, noted the biggest surprise was customers upgrading existing equipment. "The story has now shifted from whether demand will arrive to whether ASML can expand production fast enough to meet it," Britzman said.
The results provided a counterpoint to recent global tech sell-offs driven by fears of an AI bubble. However, the positive signal from Europe’s most valuable company was not enough to offset broader macroeconomic headwinds. Sluggish Chinese growth and rising energy prices weighed heavily on investor sentiment across the continent.
The Chinese economy grew 4.3% in the quarter to 30 June, its slowest rate in three and a half years. Sluggish domestic demand outweighed a surge in exports, missing Beijing's 4.5% to 5% target range. The data dampened the outlook for European exporters reliant on Asian manufacturing.
Geopolitical tensions also added pressure, pushing Brent crude up 1.5% to $86 a barrel. The US struck Iran for a fourth consecutive day and Iran attacked US bases in the Gulf. Iran's deputy foreign minister said Donald Trump’s decision to renew a US blockade on Iranian shipping "has, in a way, dismantled the Islamabad memorandum".
Rising oil prices contrasted with a calmer mood in bond markets, where yields fell after a larger-than-expected cooling in US inflation. The pound edged up 0.1% to $1.3406 against the dollar, while the euro stood above $1.14. Investors are now awaiting May Eurozone industrial production data due later this morning.
