European shares opened lower on Friday and remained on track to post a weekly decline.
Investor sentiment weakened as escalating tensions in the Middle East combined with a broad selloff in global technology stocks.
The pan-European STOXX 600 Index fell 0.6% to 639.94 points by 07:07 GMT.
Semiconductor Valuations Concern Investors
The STOXX 600 was heading for a modest weekly loss as investors continued reducing their exposure to semiconductor companies.
Chip stocks had rallied strongly earlier in the year. However, concerns about elevated valuations have encouraged traders to take profits and move toward less expensive sectors.
Positive forecasts from major industry companies failed to improve sentiment.
Chip equipment manufacturer ASML and Taiwan Semiconductor Manufacturing Company both delivered encouraging outlooks during the week. Nevertheless, technology shares remained under pressure across Asian, European and US markets.
European Technology Stocks Lead Declines
Europe’s technology sector dropped 2.3%, making it the weakest-performing group on the STOXX 600.
French semiconductor materials company Soitec fell 3.6%.
Shares of ASMI and ASML each declined by more than 4%, reflecting wider pressure on companies linked to the semiconductor industry.
The losses followed a sharp retreat in global technology stocks as investors questioned whether AI-related and chip-sector valuations had risen too quickly.
Investors Rotate Toward Luxury Stocks
As technology stocks weakened, investors increasingly turned toward sectors that had underperformed for much of the year.
Luxury shares were among the strongest performers on the STOXX 600 and had gained approximately 3% during the week.
The move suggests that investors may be searching for opportunities in sectors that have not participated fully in the recent technology-driven market rally.
Burberry Reports Continued Recovery
British luxury group Burberry said its recovery continued during the April-to-June quarter.
Strong sales in the United States and China helped support the company’s performance.
However, Burberry shares fell 1.7% after management warned that the Middle East conflict had reduced tourist spending in Europe.
The comments highlighted how geopolitical uncertainty can affect travel demand and luxury retail sales.
Saab Gains Following Strong Results
Swedish defence and aerospace company Saab rose 3.4% after reporting stronger-than-expected second-quarter operating profit.
The company benefited from solid demand across its major markets.
Higher sales and increased order intake also supported the results as governments continued raising defence spending.
Iran Attacks Push Oil Prices Higher
Middle East tensions remained a major focus for investors.
Iran said it had launched fresh attacks against US facilities in the Gulf, adding to concerns about a broader regional conflict.
The escalation pushed oil prices higher and increased fears about possible disruptions to energy supplies and global trade.
European Markets Face Multiple Risks
European stocks are being influenced by several competing forces.
Technology shares remain vulnerable following their earlier rally, while geopolitical tensions continue to increase uncertainty and support oil prices.
At the same time, sectors such as luxury and defence are attracting investor interest.
Markets will now monitor developments in the Middle East, movements in global technology stocks and upcoming corporate earnings for further direction.
