European shares pause after rally as concerns over Fed rates, Iran peace deal linger

PUMA SE

01/07/2026 09:43

Schneider Electric down on $3.1 bln all-cash Cognite takeover
Saab climbs after signing Ukraine fighter-jet contract
Fed's Warsh does not guide on future policy moves at Sintra
Updates after markets close
By Johann M Cherian and Purvi Agarwal

    July 1 (Reuters) - European shares slipped on Wednesday, after a strong finish to the second quarter, as investors assessed indications that U.S. interest rates could stay higher for longer, and the progress of U.S.-Iran peace talks. 
The pan-European STOXX 600 index .STOXX closed 0.4% lower after logging its strongest quarter since October 2020 in the previous session.
The STOXX tech index .SX8P pulled back 1.2% after logging its strongest quarterly performance since late 2001 in the previous session, with valuations now at par with Wall Street rivals. 
Chip equipment maker ASML ASML.AS dropped 4.6%, while semiconductor stock Soitc SOIT.PA slipped marginally.
AI equipment maker Schneider Electric <SCHN.PA> lost 3.1% after signing an agreement to acquire Cognite Holding, a privately held AI software and industrial data provider, for $3.1 billion in an all-cash deal.
"We still like the tech sector even going forward... It will keep being some sort of a driver, both in terms of earnings growth and performance," said Luca Finà, head of active equity at Generali Asset Management.
Finà expects the earnings growth differential between European and U.S. stocks to narrow in the upcoming quarters, potentially bringing back international flows and powering strong performances in Europe.

    Meanwhile, Federal Reserve Chair Kevin Warsh said at the European Central Bank's Sintra conference that policymakers will decide whether to raise interest rates when they begin their next meeting, reiterating his stance on not giving forward guidance. 

    "What's troubling investors is the prospect of a rate hike at the end of the year," said Dan Coatsworth, head of markets at AJ Bell. 
  

    Coatsworth said markets continued to hunt for any "morsel" of information despite Warsh's determination not to guide on rates.
  
Traders anticipate both the Fed and the ECB lifting interest rates by at least 25 basis points later this year, LSEG-compiled data showed. While crude oil prices have fallen back to pre-Iran-war levels, concerns remain that inflation pressures will linger.
The U.S. and Iran held indirect technical talks in Doha, seeking to agree on the flow of shipping through the Strait of Hormuz and secure a lasting ceasefire, a source with direct knowledge of the talks and an Iranian official said.
Among stocks, Primark owner Associated British Foods <ABF.L> slipped 3.2% after saying it still expects annual profit to be below the prior year's outcome.
Swedish defence equipment maker Saab <SAABb.ST> gained 3.3% after signing a contract to deliver 16 Gripen E fighter aircraft to Ukraine in a deal worth about 24.6 billion Swedish crowns ($2.54 billion).
Paris-listed shares in SES SESFd.PA SESFg.LU topped the STOXX 600 gainers with a 10% rise after the U.S. Federal Communications Commission said it would vote on setting up a new spectrum auction in 2027, which analysts say is positive for the company. 

 (Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Ronojoy Mazumdar and Kevin Liffey)
 ((johann.mcherian@thomsonreuters.com))