European stocks advanced on Wednesday, led by technology shares, though gains were limited. Investors remained cautious about inflation risks stemming from geopolitical tensions, with bonds staying under pressure, while also monitoring developments in U.S.-Iran relations. As of 08:51 GMT, the pan-European STOXX 600 index rose 0.2% to 612.84 points; Germany's DAX index and France's CAC 40 index gained 0.2% and 0.3%, respectively. U.S. President Donald Trump stated on Tuesday that a war would "end soon," while Vice President Mike Pence indicated progress in talks with Iran to resolve the conflict. European markets have underperformed compared to other major global markets due to the region's high dependence on oil imports, with rising crude prices continuing to weigh. Meanwhile, the artificial intelligence boom has propelled U.S. stocks to record highs. Roland Kaloyan, European equity strategist at Societe Generale, commented: "My view on European equities remains unchanged. Expectations for the first quarter were low, and performance was relatively smooth; challenges will increase in the second quarter as the impact of the war gradually becomes apparent. I am not bearish, but I expect the market may enter a consolidation phase before year-end." Chip giant Nvidia is set to report earnings after the market close on Wednesday, which may test the momentum of the AI-driven market rally. European semiconductor stocks strengthened, with ASM International, ASML, and STMicroelectronics rising 3%-4%; the technology index overall gained 1.2%. Defense stocks climbed, with Czech arms manufacturer CSG surging 11% following its first-quarter results. British defense contractor Babcock saw its shares rise 2.3% after Peel Hunt upgraded its rating from "hold" to "buy." The media sector led the declines, falling 1.8%; luxury goods stocks dropped 0.7%. Euronext's shares rose 5% after the exchange operator reported better-than-expected first-quarter earnings. British retailer Marks & Spencer, which saw annual profit decline due to a cyberattack, forecast profit growth for the coming year, sending its shares up 5.1%. Norwegian industrial investment company Orkla tumbled nearly 7% as costs rose and profits fell due to the Middle East conflict. In other news, the European Union and the United States reached a provisional agreement to eliminate tariffs on U.S. imports. This agreement stems from a trade deal last July, aimed at averting threatened tariff hikes by Trump ahead of a July 4 deadline. Data showed that UK consumer price inflation slowed to 2.8% in April from 3.3% in March. The UK's FTSE 100 index ended the day flat.
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