European Stocks Reverse Gains as Tech and Defense Shares Weigh Down Markets

European equities pulled back from a record high, with technology stocks tumbling sharply alongside their US chipmaker counterparts.

The Stoxx Europe 600 Index closed 0.4% lower, having earlier climbed as much as 0.8% before giving up those gains.

Technology shares dragged the benchmark index down, with ASML Holding NV falling 6.5%, while the Nasdaq 100 Index at one point plunged 6.4%.

Investors are reducing exposure to the sector on concerns that a Democratic sweep of Congress could hinder the rollout of artificial intelligence.

A basket of European semiconductor stocks compiled by UBS Group AG dropped 8.6%, hitting its lowest level since April.

Defense stocks also weighed on the benchmark after Rheinmetall AG released a disappointing outlook.

Shares of the German defense giant at one point fell 18% after the company on Thursday cut its 2026 sales target for the second time, citing delays in the Boxer armored vehicle program.

Among other individual movers on Thursday, AP Moller-Maersk A/S declined after the shipping company raised its guidance but failed to satisfy investors who had anticipated a larger upgrade.

As gold extended Wednesday's rally, precious metal miners such as Endeavour Mining Plc and Pan African Resources Plc ranked among the best performers.

The Stoxx Europe 600 Index had earlier surpassed its August closing high.

Since the start of October, the index has outperformed the MSCI ACWI Index tracking global equities and is on track for its best relative quarterly performance since the first quarter of 2025.

As the AI trade loses momentum, investors are flocking to defensive stocks such as healthcare and consumer staples, making European markets one of the beneficiaries.

European companies have so far reported better-than-expected results this earnings season.

According to data compiled by industry research, third-quarter profits for MSCI Europe Index constituents are expected to grow more than 32%, the fastest pace since early 2022.

In other markets, the UK's FTSE 100 Index edged lower after the Bank of England raised interest rates and hinted it might act again.