European equities hit fresh records while investors look past technology volatility and await key U.S. jobs data for clues on Federal Reserve policy
Global equity markets regained momentum on Thursday, with European stocks climbing to fresh record highs as stronger-than-expected corporate earnings and renewed optimism about artificial intelligence-driven growth outweighed concerns over a volatile technology sector and uncertainty surrounding U.S. monetary policy.
Investor sentiment also received support after reports of a proposed diplomatic arrangement involving Iran and Oman that markets interpreted as a possible step toward easing tensions in the U.S.-Iran conflict, reducing fears of prolonged disruption to global energy supplies.
The rebound followed a cautious overnight session on Wall Street and across Asian markets, where investors took profits in several high-flying semiconductor and AI-related stocks after recent earnings failed to exceed elevated market expectations.
By early European trading, however, risk appetite had returned.
The pan-European STOXX 600 index touched a record high, supported by gains in media and telecommunications shares, before trading 0.4% higher. London’s FTSE 100 rose 0.3%, France’s CAC 40 advanced 0.8%, while Germany’s DAX added 0.1%.
The recovery highlighted investors’ continued willingness to buy into temporary market weakness, particularly as corporate earnings continue to indicate resilient economic activity and sustained investment in artificial intelligence infrastructure.
Hani Redha, multi-asset portfolio manager at MetLife, described the previous session’s weakness as a natural pause following an exceptionally strong rally.
“This is just part of an overall hangover from a tremendous party we’ve had in the market over the last few trading sessions,” Redha said.
“We remain pretty constructive. I don’t expect the pace of returns that we saw over the last few weeks, but we should be still in a market environment which is conducive for risk assets, equities in particular.”
This supports a broader market view that recent volatility is being driven more by positioning and lofty investor expectations than by deterioration in economic or corporate fundamentals.
The latest swings have been particularly pronounced across technology stocks, where soaring valuations have raised the threshold for earnings surprises. Although several AI-linked companies reported results that exceeded Wall Street estimates, investors reacted negatively after the performances failed to surpass the market’s most optimistic forecasts.
Shares of Sandisk, Advanced Micro Devices (AMD) and storage technology company Western Digital all came under pressure after their earnings releases, contributing to weakness across semiconductor stocks.
The pullback spread into Asian markets on Thursday.
Japan’s SoftBank Group fell 4.36%, while semiconductor equipment manufacturer Tokyo Electron dropped more than 5%. Chip testing equipment maker Advantest declined 2.14%, and memory chip producer Kioxia tumbled 8.84%.
South Korea’s technology sector also came under heavy selling pressure. SK Hynix slid 9.71%, Samsung Electronics lost 6.13%, and Seoul Semiconductor fell 4.27%.
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, declined 1.46%.
The declines followed a powerful rally the previous day, when many Asian technology stocks posted double-digit gains, underscoring the heightened volatility that has become a defining feature of AI-related equities.
Despite the sharp swings, analysts continue to express confidence in the sector’s longer-term outlook.
J.P. Morgan said in a research note on Wednesday that the recent sell-off had not altered the underlying investment case for artificial intelligence.
While investors have questioned whether technology companies can sustain the current pace of AI spending, the bank said it does not expect major cloud providers to significantly reduce capital expenditure.
“Stepping away from the share price moves, we do not see any fundamental indicators that signal meaningful weakness in the next 6-12 months,” the bank said.
The assessment echoes a growing consensus among analysts that recent declines reflect valuation concerns rather than weakening demand for AI infrastructure. Supporting that view, S&P Global said in a report published on Aug. 5 that global economic growth is increasingly being driven by investment in artificial intelligence and defense.
The report noted that output among manufacturers of technology equipment expanded in July at its fastest pace since May 2021.
“Alongside rising demand for software and related IT services, technology reported the fastest growth for ten months,” S&P Global said.
The findings suggest that demand across the AI supply chain, spanning semiconductors, servers, networking equipment and enterprise software, remains robust despite periodic market corrections.
Meanwhile, geopolitical developments also influenced investor sentiment.
Oil prices retreated below the $80-per-barrel mark after Reuters reported a proposal involving Iran and Oman that could help bring an end to the U.S.-Iran conflict.
Under the reported proposal, Iran would assume control over ships entering the Gulf through the Strait of Hormuz, one of the world’s most strategically important oil shipping routes. The United States did not comment on the proposal, which would represent one of Washington’s most significant concessions to Tehran if implemented.
Although Brent crude later edged 0.3% higher to $79.70 a barrel and U.S. West Texas Intermediate gained 0.2% to $75.37, traders appeared less concerned that geopolitical tensions would trigger another sustained spike in energy prices.
Redha said markets had become increasingly resilient to developments in the Middle East.
“Overall, we’ve been less concerned, I’d say, about what look like negative developments from that region. It is a headwind when oil prices do spike, but we don’t think that they’re going to derail the cycle,” he said.
The moderation in oil prices also eased concerns about inflation, an important consideration for central banks as they weigh future interest-rate decisions.
In bond markets, euro zone government debt traded largely unchanged. Germany’s benchmark 10-year government bond yield was little changed at 3.1118%, while investors prepared for France to auction nearly €13 billion ($15 billion) in government bonds later in the session.
Currency markets were similarly subdued.
The euro slipped less than 0.1% to $1.1540, while the U.S. dollar index edged 0.1% higher to 99.767. The Japanese yen traded at 157.85 per dollar, giving back some of the gains recorded after coordinated intervention by U.S. and Japanese authorities last week.
Investors are now turning their attention to U.S. nonfarm payrolls data due later in the day, one of the most closely watched economic releases for financial markets.
The employment report is expected to provide important clues about the strength of the U.S. labor market and help shape expectations for the Federal Reserve’s next interest-rate decision.
Federal Reserve Bank of San Francisco President Mary Daly said on Wednesday that she fully supported last week’s decision to leave interest rates unchanged, arguing policymakers need additional evidence before determining how to respond to inflation, which remains well above the central bank’s 2% target.
