By Johann M Cherian and Tharuniyaa Lakshmi
July 2 (Reuters) – European shares edged higher on Thursday as gains in defensives countered a slide in AI-related stocks, while investors awaited a key U.S. employment report for clues on interest rates.
The pan-European STOXX 600 index was up 0.2% at 640.70 points, as of 0756 GMT, with food and beverage, personal and household goods, and healthcare among the top gainers. The benchmark index hovered near a record high.
The STOXX 600 technology index fell 2%, led by Soitec, down 4.5%, and Aixtron, off 5.1%, as AI-linked stocks retreated after sharp losses in Asia and on Wall Street overnight. Europe’s smaller exposure to tech stocks helped limit its drag on the STOXX benchmark.
“The question now is whether all the good news around that spending has already been priced into the suppliers. Those stocks have had a very strong run, that is why markets are starting to get a bit nervous,” said Daniel Coatsworth, investment analyst at AJ Bell.
“The next round of quarterly earnings from the tech sector should provide much more clarity on whether demand remains strong or is beginning to slow.”
Analysts also said the rally, which has been concentrated in tech stocks, is likely to broaden to other sectors as oil prices ease.
“We believe there is room for the rally to broaden as investors look beyond AI-led leaders toward areas supported by structural growth, policy support, and a brighter cyclical outlook,” UBS analysts said in a note.
The focus later in the day will be on the U.S. nonfarm payrolls data for June, with investors looking for signs on the Federal Reserve’s policy path.
Data on Wednesday showed euro zone inflation rose less than expected in June, while European Central Bank President Christine Lagarde said risks to inflation and economic growth were now more balanced than a few weeks ago as oil prices fell.
However, traders continue to expect the ECB to lift interest rates by at least another 25 basis points before the year ends, LSEG-compiled data shows.
Sodexo rose 7.5% after the French food caterer raised its full-year organic revenue growth forecast, citing stronger-than-expected third-quarter performance.
Drugmaker Bayer gained 5.5% after saying it was consolidating its U.S. Roundup business in a new unit called Ruveon, after a major legal victory that blocked thousands of state-court lawsuits that claimed its weedkiller causes cancer.
(Reporting by Johann M Cherian and Tharuniyaa Lakshmi in Bengaluru; Editing by Eileen Soreng and Subhranshu Sahu)
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