European stock markets closed higher on Thursday, with technology stocks driving the main index to a one-week high, while investors remained cautious about the progress of U.S.-China talks. The pan-European STOXX 600 index rose 0.8% to close at 616.05 points, with most sectors advancing. The technology sector index surged 2.6%, led by semiconductor stocks: STMicroelectronics gained 5.4%, BE Semiconductor rose 3.3%, and Infineon jumped 5.7%. Germany's DAX index climbed 1.3%, leading major European indices, with software giant SAP rising 3.6%. Bank of America noted that SAP's sustained cloud business growth, a backlog increase of approximately 25%, combined with operating leverage and AI enablement, could drive double-digit revenue growth, with capital allocation potentially providing additional support. However, the overall scale of European AI hardware companies remains far behind their U.S. and Asian counterparts, leading many investors to shift their focus to markets outside Europe. Samir Samana, head of Global Equity and Real Assets at Wells Fargo Investment Institute, stated: "Since the launch of ChatGPT in late 2022, this theme has been a drag on European markets over the past four years. It is the most significant reason for the long-term underperformance of European stocks; recently, energy import issues and political instability have exacerbated the situation." The United Kingdom has become the latest European country to experience political turmoil: Health Secretary Wes Streeting of the ruling Labour Party resigned, raising questions about Prime Minister Keir Starmer's leadership. Frederic Carrier, head of Investment Strategy at RBC Wealth Management, said: "We are closely monitoring developments in China... Everyone hopes the Middle East crisis can be genuinely resolved." In individual stock movements, luxury brand Burberry reported fourth-quarter sales in line with expectations, but its stock price still fell 6.8%; Swiss watch group Swatch Group forecast full-year operating profit above expectations, leading to a 19.2% surge in its share price. Investment company 3i Group plunged 12.7% as its core portfolio company Action reported a slowdown in like-for-like sales growth to 2.4% for the 19 weeks to May 10, compared to 6.8% in the same period last year. On the policy front, European Central Bank Chief Economist Philip Lane indicated that interest rate hikes might be necessary to address inflation. Current money market pricing suggests the ECB could raise rates more than twice this year.
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