European Stocks Slip, Defense Sector Weighs

European stock indices closed slightly higher on Monday with support from the technology and energy sectors. The Euro STOXX 50 added 0.2% to 6,234 and the STOXX Europe 600 rose 0.1% to 636, remaining close to its record high. Chip producers and companies with exposure to AI software rebounded following their selloff last week, with ASML adding 2.3% and Prosus jumping 2.6%. These tracked gains in the US as markets continued to gauge the appropriate positioning to speculative AI bets as the biggest players upgraded guidance last week. Meanwhile, energy producers rebounded as strikes between the US and Iran over the weekend, halting the sharp retreat in crude oil prices. In turn, banks underperformed as sovereign yields also rebounded in the session. The ECB forum in the coming days will see Governing Council members give hints on whether the central bank could deliver another rate hike this year, as the pullback in energy prices contrasts with the upward momentum for core inflation.

European stocks opened the week on a cautious note, with the STOXX 50 edging up 0.2% while the STOXX 600 traded largely flat, as investors assessed developments in the Middle East and lingering concerns over technology and AI valuations. Oil prices resumed their upward trend after last week’s declines, following weekend strikes involving the US and Iran, although both sides later agreed on Sunday to pause hostilities and allow commercial vessels to transit the Strait of Hormuz freely. Meanwhile, investors also await ECB's Forum this week, where central bank leaders, including Fed Chair Warsh and ECB President Lagarde are scheduled to speak. Among individual movers, ASML Holding rose 1.1% and SAP gained 1.3%. Prosus advanced more than 3% after reporting an 84% increase in full-year adjusted core profit. On the other hand, Novo Nordisk lost 1.5%, Unilever fell 0.9% and Anheuser-Busch Inbev declined 1%.

European equity markets were set for a higher open on Monday as investors turned their attention to the ECB's Sintra Forum this week, where central bank leaders, including Fed Chair Kevin Warsh and ECB President Christine Lagarde, are scheduled to speak. Markets also continued to monitor developments in the Middle East following renewed clashes between the US and Iran around the Strait of Hormuz, although both sides agreed to suspend further attacks ahead of peace talks set to resume this week in Doha, Qatar. Meanwhile, investors will assess Spanish inflation and retail sales data, along with Eurozone economic sentiment and consumer inflation expectations figures. There are no major corporate earnings releases in Europe on Monday. In premarket trading, Euro Stoxx 50 futures rose 0.3%, while Stoxx 600 futures gained 0.15%.