Europe close: Stocks rise despite overnight tech sell-off

(Sharecast News) - European stock markets closed higher on Tuesday despite another sharp sell-off in Asian technology shares amid concerns about borrowing levels among artificial intelligence companies.

The Stoxx 600 rose 0.41% to 647.29, Germany's DAX gained 0.52% to 25,492.59, France's CAC 40 advanced 0.63% to 8,458.78 and London's FTSE 100 climbed 0.83% to 10,871.02.

"Investors continue to dump AI and chip stocks at a prodigious rate. The euphoria of May and June is long gone, but the selloff is still mostly limited to these tech sectors," said IG chief market analyst Chris Beauchamp.

"Oil's ongoing slump provides a cushion for a broad swathe of other sectors, but it is unlikely that these can remain immune for long.

"Rising CDS prices for tech heavyweights are a sign that this has the potential to turn into something quite nasty, and then in that eventuality few stocks will be able to remain immune."

Asian markets fell heavily as investors continued to reduce exposure to chip stocks, with South Korea's Kospi dropping more than 10% and trading halted at one point, while Japan's Nikkei lost more than 4%.

Investors were also awaiting Wednesday's Federal Reserve decision for signals on the interest-rate outlook, with economists expecting policymakers to leave rates unchanged.

Oil prices fell sharply, with Brent crude down 4.66% at $84.24 a barrel and West Texas Intermediate 4.09% lower at $79.23.

"Global markets are gearing up for a maniacally-busy period from tomorrow onwards," Beauchamp added.

"The ingredients for a broad selloff across asset classes are in place, only the trigger is missing."

Shop priced inflation eases in the UK

In economic news, UK shop price inflation eased to 0.9% year on year in July from 1.2% in June, according to the BRC-NIQ shop price monitor, while prices fell 0.1% month on month.

Food inflation slowed to 2.2% from 2.4% and non-food inflation eased to 0.2% from 0.6%.

British Retail Consortium chief executive Helen Dickinson said retailers had competed heavily on promotions, although electricals and health and beauty products faced stronger inflation because of rising semiconductor and manufacturing costs.

NIQ's Mike Watkins said the easing would provide some relief to consumers facing higher energy and fuel bills.

"The shop-price data reinforced that theme. British Retail Consortium figures showed UK shop price inflation rose 0.9% year-on-year in July, below market expectations for a 1.2% increase and slower than June's 1.2% rise," said TickMill market strategy partner Patrick Munnelly.

"It was the slowest increase since December 2025. On a monthly basis, shop prices fell 0.1%.

"That added to the recent evidence that goods inflation and retail price pressure are cooling."

ASML in the red, Mercedes rises

In equities, ASML Holding fell 3.62% as technology stocks remained under pressure and following a report that China had begun producing domestic deep-ultraviolet lithography machines, a technology long dominated by the Dutch group.

On the upside, Unilever jumped 8.02% after better-than-expected second-quarter sales, while LVMH gained after reporting a 3% rise in quarterly sales supported by resilient US demand.

Mercedes-Benz Group rose 2.88% after posting higher operating profit.

Reporting by Josh White for Sharecast.com.