European stock markets traded lower on Thursday as technology stocks came under pressure after quarterly results from U.S. tech giant Alphabet raised fresh concerns over artificial intelligence spending, while investors also monitored escalating tensions in the Middle East and awaited the European Central Bank's policy decision. The pan-European STOXX 600 index fell 0.5% to 643.47 points by 0705 GMT, with the technology sector emerging as the biggest drag on the benchmark. Latest developments show U.S. stock futures also trading higher, with Nasdaq 100 futures advancing 0.9% and Dow Jones futures up 115 points as investors prepare for major tech earnings after last week's sell-off.
Technology stocks led the declines, with the sector emerging as the biggest drag on the benchmark after Alphabet increased its planned capital expenditure for 2026 by $15 billion, reigniting investor concerns over whether heavy investments in artificial intelligence will deliver adequate returns. French-Italian chipmaker STMicroelectronics tumbled 15% after forecasting third-quarter revenue with a midpoint slightly below market expectations, while Dutch semiconductor equipment supplier BE Semiconductor Industries also declined 4.6% after releasing its second-quarter earnings. The technology sector's weakness reflects broader concerns about valuations in the AI and technology sector, with investors becoming increasingly wary of elevated valuations in memory chip space where share prices have surged to unprecedented levels this year.
Energy stocks bucked the broader market trend, with the STOXX 600 energy index gaining 0.6% as Brent crude futures climbed above $96 per barrel after the United States launched a fresh round of strikes on Iran. Yemen's Houthi forces targeted oil tankers in the Red Sea, broadening the regional conflict and raising concerns over energy supplies and the global interest-rate outlook. The oil price gains provided relief to risk appetite, with oil prices having pulled back from their overnight highs on reports that Iran has received new proposals for negotiations. However, losses in crude were limited after Yemen's Iran-aligned Houthi movement announced a blockade of Saudi Arabia on Monday.
Corporate earnings remained in focus across Europe, with investors assessing quarterly results from Nestlé and TotalEnergies for further clues on the health of the region's corporate sector. Attention later in the day will also turn to the European Central Bank, which is widely expected to leave interest rates unchanged at its latest policy meeting, as markets look for guidance on the future path of monetary policy. The ECB decision comes amid ongoing geopolitical tensions and technology sector concerns, adding another layer of uncertainty to European markets.
