(Sharecast News) - European stocks closed lower on Thursday as renewed geopolitical tensions and a global technology sell-off weighed on sentiment.
The Stoxx 600 fell 0.008% to 642.66, Germany's DAX lost 0.53% to 24,866.46, France's CAC 40 declined 0.23% to 8,363.09, and London's FTSE 100 edged up 0.54% to 10,572.24.
"The FTSE 100 took its cue from weak trading in Asia and fell back amid a lower open for most other European markets," said AJ Bell head of markets Dan Coatsworth.
"Fragile sentiment is leading to a continued pullback in memory chip stocks after their gravity-defying run as investors fret about elevated valuations."
Markets were unsettled after overnight US strikes on Iranian targets prompted Tehran to warn it could restrict regional energy exports.
Concerns about disruption in the Strait of Hormuz pushed Brent crude up 0.74% to $85.58 a barrel and West Texas Intermediate 0.73% higher to $80.18.
The rise added to inflation and interest-rate concerns, hitting rate-sensitive consumer discretionary, real estate and industrial stocks, while travel and leisure shares retreated on the prospect of higher fuel costs.
Sentiment was also hurt by heavy losses among Asian semiconductor and AI-linked stocks.
"Ongoing military action by both sides and threats to major shipping routes have kept energy prices elevated," said Trade Nation senior market analyst David Morrison.
"This is currently leading to increased uncertainty across financial markets."
On the technology sell-off, he added: "Once again, South Korea's chip companies have exerted an outsized influence across the region, and this has rolled over into US semiconductor stocks this morning."
Euro area records biggest trade deficit in over three years
In economic news, Eurostat said the eurozone recorded its largest goods trade deficit in more than three years in May, widening to 7.8bn from 1.2bn in April and exceeding forecasts for 1.6bn.
Exports rose just 0.1% year on year to 243.6bn, while imports jumped 10% to 251.4bn.
The region has recorded only five monthly deficits in the past three years, with May's the deepest since April 2023, as the energy deficit increased to 30.3bn from 21.9bn a year earlier.
The UK economy meanwhile expanded 0.1% in May, in line with expectations, as 0.3% growth in services offset declines of 0.5% in production and 0.8% in construction.
GDP grew 0.7% in the three months to May, ahead of forecasts for 0.5% but below the upwardly revised 0.8% recorded previously, with services rising 0.7% and construction rebounding 1.6%.
The ONS highlighted strength in computer programming, advertising and pharmaceuticals, although Liz McKeown said the latest two months showed a weaker picture.
The CBI's Ben Jones said the economy was struggling to build sustained momentum, while ING's James Smith questioned whether the figures reflected underlying conditions and forecast third-quarter growth of 0.1% to 0.2% as the effects of the Iran war and higher energy prices became clearer.
AJ Bell's Danni Hewson warned that high government debt left the UK vulnerable to further inflation shocks.
"Sterling remained relatively stable after UK data this morning showed the economy expanded 0.1% in May, matching expectations following a contraction in April," Morrison said.
Across the Atlantic, US initial jobless claims fell by 8,000 to 208,000 in the week ended 11 July, their lowest level in more than two months and below expectations for 217,000.
Continuing claims declined by 16,000 to 1.8m in the week ended 4 July, compared with forecasts for 1.82m, while the four-week average fell by 4,750 to 214,250 and the insured unemployment rate remained at 1.2%.
Ocado recovers losses, Rotork rockets on takeover deal
In equities, Ocado Group closed up 2.98%, having sold off for most of the session following its half-year results, while Rotork surged 66.78% after agreeing to a 4.1bn takeover by Swiss engineering group ABB.
"Once you remove one-off fees linked to the closure of customer centres, it's clear that Ocado is running in quicksand," Coatsworth said.
"The joint venture with Marks & Spencer looks healthy, but that is not its bread and butter."
"The market hates the latest results, sending the share price to a 13-year low."
Turning to Rotork, Coatsworth said: "The latest name to fall prey to a bid is engineer Rotork.
"The UK is home to several UK industrial businesses who are global leaders, albeit in niche areas.
"A takeover approach from Swiss engineering giant ABB is likely to see their ranks thinned, with Rotork's board having signed off on the deal and shareholders likely to fall in line given the offer is in cash and pitched at a healthy premium."
Reporting by Josh White for Sharecast.com.
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