European shares post biggest quarterly gain in more than five years
European shares capped their strongest quarter since 2020, with the STOXX 600 up 10% as AI-heavy tech stocks and calmer oil markets lifted sentiment.
European shares ended Tuesday with their biggest quarterly gain in more than five years, as the STOXX 600 rose 0.9% on the day and 10% over the quarter to close at about 641.73. The index also hit an intraday record, extending its run to a third straight monthly gain and leaving it up roughly 18.6% for the year.
Technology stocks powered much of the advance, climbing 2.5% on the day and posting their sharpest quarterly jump since October 2001. ASML rose 6.8%, while STMicroelectronics and Infineon also gained as investors kept rewarding companies tied to AI infrastructure and semiconductor demand. ASML had already lifted its 2026 forecast in April on stronger AI-chip demand. STMicroelectronics raised its 2026 and 2027 data-center revenue targets on June 2, citing continued demand for AI infrastructure, and Infineon said in a May press release that the AI boom had strengthened its full-year outlook.
The rally was not confined to chipmakers. Siemens Energy added 5.6% after reiterating strong demand trends in a quarterly earnings call a day earlier, following May 12 results that showed record order intake of €17.7 billion and a €154 billion order backlog. Travel and leisure shares, which had been pressured by the Middle East conflict, rose more than 19% for the quarter, their strongest gain since January 2023, as oil prices slipped back toward pre-war levels.
J.P. Morgan lifted its year-end target for the STOXX 600 to 680 from 630 on June 29, implying about 7% upside from the previous close. Barclays said falling oil prices and stronger chip prices create a supportive backdrop for European equities, even if the mix is uneven across sectors.
Rob Lancastle of J O Hambro Capital Management said Europe still looks attractive because investors are paying less for growth than they often do in U.S. tech or Asian semiconductors, while some less celebrated companies still offer value. Central bankers at the European Central Bank Forum on Central Banking in Sintra, Portugal, were also weighing the risk that the oil shock could linger in the economy as markets pushed higher.
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