Europe close: Markets erase gains late on as chip stocks tank

(Sharecast News) - Renewed selling pressure in the chip sector took the shine off earlier gains on Monday, with stocks across Europe coming off their daily peaks to finish more or less flat.

Markets raced ahead early on as oil prices dropped following a tentative agreement between the US and Iran to pause their attacks, easing the geopolitical risk that has dampened sentiment in recent weeks.

However, Wall Street got off to a weak start - the S&P 500 and Nasdaq were firmly in the red shortly after the opening bell - as a sell-off in the chip sector resumed amid concerns of a rising competitive threat from China's semiconductor manufacturing sector.

The benchmark Stoxx 600 index, which rose nearly 1% earlier on, finished just 0.02% higher at 644.62, on the back of heavy losses among European semiconductor names after Chinese memory chipmaker ChangXin Memory Technologies (CXMT) soared over 500% on its market debut in Shanghai.

"It now controls around 8-10% of the global DRAM market, and some analysts see that rising into the high teens by 2028 as it aggressively expands production to take on Samsung, SK Hynix and Micron - three of the hottest stocks of the past year," said Ipek Ozkardeskaya, senior analyst at Swissquote.

"CXMT is another reminder that China is quietly building its own AI supply chain from chips to models, reducing its dependence on Western technology while becoming an increasingly serious competitor to the incumbents."

Back in Europe, BE Semiconductor Industries was the standout faller on the Stoxx 600, dropping 10%, followed by ASML and ASM International.

Despite the late sell-off, a near-6% fall in the price of Brent crude to $86.44 helped to bolster sentiment for most of the session on Monday, after US President Donald Trump paused his latest campaign of attacks on Iranian targets and Tehran stopped what it called "retaliatory" strikes. The news eased fears of an immediate escalation that had threatened to disrupt Middle Eastern supply routes.

The ceasefire agreement, announced late on Sunday, includes a temporary halt to crossborder strikes and guarantees for commercial shipping through the Strait of Hormuz - a corridor that handles around a fifth of global crude flows.

Washington framed the pause as a step toward broader talks, but officials stressed that Iran must rein in allied militias operating in Yemen, Iraq and Syria.

In economic news, the IFO's German business climate index rose 86.6 points in July, up from 85.7 points in June, with forward-looking sentiment picking up significantly. This was the third straight monthly improvement and the highest reading since February, coming in ahead of the 86 level expected by analysts.

In other equity news, London's Vodafone gained after a strong first-quarter performance that led the telecoms operator to forecast annual earnings at the upper end of its �13bn - 13.3bn guidance range.

Volkswagen Group edged lower after subsidiary Audi lowered its full-year sales and profit outlook following a challenging first half. Full-year revenues are now expected to be between �58bn-63bn, while the operating margin is projected to be 5-7%, down from earlier guidance of �63bn-68bn and 6-8%, respectively.

Meanwhile, travel stocks across the continent were performing well as oil prices dropped, including IAG, Deutsche Lufthansa and Air France-KLM.

In contrast, energy majors BP, Shell, Repsol, TotalEnergies and Eni SpA were all tracking crude lower.

Luxury carmaker Porsche AG gained on plans to cut a further 5,000 jobs by 2035 as part of a wide-ranging package designed to lower personnel costs, raise productivity and support the strategic realignment of the sports-car manufacturer.