- The pan-European Stoxx 600 Index (SXXP:IND) rose 0.7% to 625.34 points on Tuesday, with the technology sector leading the gains. STMicroelectronics (STMPA:FP) surged 15.14% after significantly raising its revenue target for its data center business, reaching a record high since September 2000.
- The Eurozone's Consumer Price Index (CPI) for May climbed to 3.2% year-on-year, up from 3.0% in April, mainly driven by rising energy and service costs. This data further reinforced market expectations that the European Central Bank (ECB) will raise interest rates by 25 basis points at next week's policy meeting.
- Signs of easing geopolitical tensions, with US-Iran discussions on a ceasefire proposal, boosted market risk appetite. Brent crude futures (BRN1!) stabilized around $95 per barrel, but high energy costs continue to pose potential pressure on corporate profit margins.
Strong AI Chip Demand Boosts Tech Sector Valuation
STMicroelectronics not only recorded strong performance in its own results but also triggered a ripple effect across the European semiconductor and artificial intelligence supply chain. The company's management raised forward guidance for its data center business, confirming that global demand for AI infrastructure construction has not slowed. Driven by this positive industry sentiment, competitors like Infineon (IFX:GR) saw their stock rise by 9.52%, and industrial automation and energy management giant Schneider Electric (SU:FP) also climbed 3.96%. Investment institutions noted that the semiconductor industry is transitioning from a traditional cyclical industry to the core digital infrastructure of the global economy, with the sustainability of its high-growth cycle potentially exceeding previous market expectations.
Inflation Data Rebound Strengthens ECB Rate Hike Logic
While micro-level corporate earnings are improving, macro-level inflationary pressures remain solid. The latest data shows that the Eurozone's nominal inflation rate in May rebounded against the trend, reaching 3.2%. This change is mainly attributed to supply chain transmission caused by geopolitical conflicts and the stickiness of service prices. Market analysts suggest that if core inflation does not establish a downward trend in the coming months, the ECB will not only firmly raise rates by 25 basis points next week but may also be forced to maintain a hawkish stance in subsequent policy paths, thereby exerting temporary pressure on the valuation of growth assets in the Eurozone.
Easing Geopolitical Tensions Boost Risk Appetite
In addition to the intrinsic momentum of tech stocks, marginal improvements in the external macro environment also supported the rise in European stocks. As the Middle East conflict enters its third month, recent peace talks between the US and Iran have released initial constructive signals. Although direct official communication remains limited, the review process of the ceasefire proposal has alleviated extreme market concerns about disruptions in the global energy supply chain. Risk assets rebounded across the board, with funds rotating from safe-haven assets to equities and other risk assets, limiting the downside potential of the European market amid rising inflation data.
High Energy Costs and Cross-Asset Pricing Risks
Although progress in ceasefire talks has stabilized Brent crude prices after early trading fluctuations, international oil prices remain at a high level of $95 per barrel. High energy costs are expected to continue permeating the real economy over the coming quarters. If oil prices fail to return to central levels in the long term, corporate input costs will remain under pressure. In cross-asset transmission, if oil prices trigger secondary inflation risks, Eurozone government bond yields may face a new round of upward pressure, potentially leading to a repricing of equities, particularly in the high-valuation tech sector.
