European Stocks Drop from Records

European stocks eased from records on Wednesday as a fresh pullback for chip producers offset support from an improving macroeconomic backdrop. The Euro STOXX 50 dropped 0.6% to 5, and the STOXX Europe 600 fell 0.4% to 640. ASML and Infineon fell 4.6% each, tracking the AI infrastructure sector globally amid fresh uncertainty on whether the historical rally for chip producers has been overdone. Other companies with exposure to data centers and their power declined, with Siemens, Schneider, and Siemens Energy dropping between 3.1% and 1.5%. In turn, the software side rallied on respite from US hyperscaler giants. Also, banks were mostly higher as softer-than-expected inflation in the Eurozone limited expectations of another rate hike by the ECB this year. UniCredit added 0.6% and Deutsche Bank jumped 0.4%. The bloc's inflation rate fell to 2.8%, below expectations of 3%, and the core gauged fell to 2.4%.

European stocks opened Q3 on a weaker footing, with both the STOXX 50 and the STOXX 600 slipping 0.3% as investors paused after strong gains during the previous three-month period. Traders continued to assess the AI-driven rally while digesting signs of a stalemate in US-Iran talks after Iran said it would not meet with US officials. Investors were also focused on the ECB Forum, where policymakers from major central banks, including the Fed and the ECB, are scheduled to speak later in the day. The tech sector was broadly unchanged, with ASML Holding down 0.4%, Infineon Technologies hovering around the flatline, and STMicroelectronics edging up 0.1%. Among other major stocks, LVMH (-0.8%), Siemens (-1.1%), Hermes (-0.5%), and Santander (-1.4%) traded lower. Schneider Electric dropped 2.5% after announcing an agreement to acquire Cognite Holding. On the upside, Rheinmetall gained 2.9%, and Airbus was up 1.6%, some of the session's top performers.

European equity markets were set to open slightly lower on Wednesday as the recent rally in global stocks lost momentum, while investors cautiously awaited a key US jobs report and Federal Reserve Chair Kevin Warsh’s remarks at the ECB Forum in Sintra, Portugal. European shares ended at record highs on Tuesday, supported by softer inflation data and growing expectations that the European Central Bank will keep interest rates unchanged in the near term. Investors now turn their focus to UK house price data, flash Eurozone inflation estimates and final PMI readings from across the region. Meanwhile, no major corporate earnings releases are scheduled in Europe. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down about 0.1%.