Peter Wennink, CEO of ASML, said:Photo: Cho Sung-joon/Bloomberg
Tech stocks led gains in Europe as Dutch chipmaker ASML's strong quarterly orders and German software company SAP's better-than-expected results lifted investor sentiment after a shaky start to 2024. .
The tech sector soared nearly 4% on Wednesday, adding about 36 billion euros in market capitalization, as the region's top two tech companies showed increased demand for their industries. Chip equipment maker ASML, a bellwether of industry health, rose 7.5%, its biggest gain since November 2022.
Peter Wennink, CEO of ASML, said the semiconductor industry is seeing bright spots after hitting rock bottom. His comments and ASML's strong orders helped boost stocks such as ASM International and BE Semiconductor Industries.
SAP's cloud order backlog showed solid growth in the fourth quarter, demonstrating strong demand for cloud-based software. European tech sector valuations remain below their five-year average, and these reports leave room for further upside.
Additionally, the positive outlook for these stocks gives investors reason to rejoice, especially after the bar for fourth-quarter forecasts has been lowered in recent weeks.
Patrick Armstrong, chief investment officer at Prulimi Wealth, expects higher earnings to support continued stock price gains. “Technology has rebounded significantly, but stocks are not much more expensive than they were last year, as they are often driven by revenue growth rather than multiple business expansions.”
The Stoxx 600 index rose 1% by midday in London markets on Wednesday, on the eve of the first European Central Bank interest rate decision of 2024. Mining stocks and real estate stocks also outperformed in the region's broad risk rally. Among other stocks, utility and renewable energy stocks rose on strength from Siemens Energy. EasyJet shares also rose following the airline's trading update.
Beyond some positive results, there are reasons to be cautious, with eurozone private sector activity contracting in January for the first time in eight months. The data showed the S&P Global Purchasing Managers Index rose to 47.9, just short of the 48 expected by economists and the closest to the 50 level, which signals economic expansion, since July.