European Shares Slump Amid U.S.-China Trade Fears and ECB Rate Anticipation

European shares closed lower for a third consecutive day, mainly impacted by sliding chip stocks due to potential U.S.-China trade tensions. The pan-European STOXX 600 index dropped 0.5%, with technology stocks down 4.5%. Investors are now looking towards the European Central Bank's upcoming rate decision.

European shares closed lower for a third straight day on Wednesday, hit by significant declines in chip stocks as investors remained cautious due to potential U.S.-China trade tensions. Attention has now shifted to the European Central Bank's upcoming rate decision.

The pan-European STOXX 600 index declined by 0.5%, reaching its lowest in a week, with the technology sub-index plummeting 4.5%, marking the largest single-day drop since December 2022. ASML, the world's largest supplier of chip-making equipment, saw its shares fall nearly 11%, driven by fears of tighter U.S. export restrictions to China overshadowing its second-quarter earnings.

Bloomberg News reported that the U.S. might impose stricter trade restrictions on companies continuing to provide China with advanced semiconductor technology. Other semiconductor stocks also took a hit, with ASM International and BE Semiconductor each falling over 7%. Chris Beauchamp, chief market analyst at IG Group, linked the decline in chip stocks to concerns over China's growth, geopolitical tensions, and rapid stock price increases.

Despite these losses, the technology index remains up almost 13% for the year, one of the top-performing sectors in the STOXX 600. On the economic front, eurozone inflation for June held at 2.5% year-on-year. This data precedes the European Central Bank's rate-setting meeting later this week, where rates are expected to remain steady.

In the UK, June inflation defied expectations for a slight drop, holding steady at 2%. The FTSE 100 index ended up by 0.3%. Among individual stocks, Adidas climbed 2.1% following an upbeat full-year earnings forecast bolstered by strong second-quarter performance, while rival Puma gained 2.2%.

Roche surged 5.8% after announcing positive early-stage trial results for an obesity drug candidate, placing it firmly in the race to develop obesity treatments. Shares of its competitor, Novo Nordisk, dipped 5.3%. Danish company Demant plummeted 14.8% upon lowering its full-year outlook, whereas Swedish firm Munters jumped 22.4% after surpassing profit expectations for the second quarter.

(With inputs from agencies.)