European markets fell on Thursday, hit by a sharp sell-off in the technology sector that spread from Wall Street to Asian markets overnight, following higher-than-expected US inflation data that triggered a rise in borrowing costs globally.
The pan-European STOXX Europe 600 index fell by about 0.35%, erasing Wednesday's modest gains, as interest rate-sensitive growth sectors declined.
Germany’s DAX index fell by 0.5%, France’s CAC 40 index declined by 0.2%, and Britain’s FTSE 100 index lost 0.1%.
Technology stocks lead the continental divestment despite ASML's temporary relief
European technology stocks were at the center of the decline on Thursday, as the temporary relief gains that followed ASML Holding NV's third-quarter results just 24 hours earlier quickly dissipated.
Shares of ASML Holding fell 6.4%, and ASM shares dropped 9.8%. BESemiconductor also declined, STM Inc. lost 7.1%, and Infineon fell 8.6%.
The US Consumer Price Index (CPI) released Wednesday – which showed headline inflation accelerating to 3.7% year-on-year and core inflation rising to 2.6% – triggered a sharp repricing in global fixed-income markets. With the yield on the benchmark 10-year US Treasury note climbing to 5.266%, high-multiplying technology stocks faced immediate valuation pressure in Asia and Europe.
Although ISML Holdings’ strong fourth-quarter sales forecast on Wednesday temporarily contained overall concerns, technical trading tables resumed an aggressive sell-off on Thursday, bringing down semiconductor equipment suppliers, chipmakers and software companies across the continent.
A rocky start to the third-quarter earnings season dampens investor hopes
Institutional investors were counting on the third-quarter earnings season to provide a crucial boost to European stocks, which remain heavily constrained by high regional borrowing costs and widening sovereign bond yield spreads.
However, the earnings season got off to a rocky start for the continental giants; French luxury goods group LVMH disappointed markets earlier in the week with below-expected third-quarter sales, revealing a decline in consumer confidence in China, which cast a shadow over the margins of the luxury consumer goods sector.
Although ISML Holdings recorded strong bookings for the fourth quarter in the near term, management's decision to narrow its sales target for the full year 2026 served as a reminder of the normalization of demand in the medium term in non-AI-related end markets.
Continued downward pressure on returns is keeping markets constrained.
With European central bankers maintaining their cautious stance, and European Central Bank President Christine Lagarde categorically rejecting any speculation about monetary intervention to support French sovereign debt, equity multiples remain closely tied to bond market returns.
Unless corporate earnings show a wider expansion in margins capable of offsetting record global interest rates that have reached their highest levels in 24 years, European trading tables expect risk appetite to remain subdued, leaving markets vulnerable to macroeconomic data shocks and energy price spikes linked to geopolitical tensions.
