European Markets Bounce Back As Tech Selloff Subsides

European shares experienced a notable recovery on January 28, 2025, closing at a record high as the recent tech selloff began to ease. The pan-European STOXX 600 index rose by 0.4%, driven primarily by gains in the retail sector, which saw a 2.1% increase. This rebound came a day after a significant market downturn triggered by concerns over a low-cost AI model from the Chinese startup DeepSeek, which had rattled investors globally.

Key Takeaways

• European shares closed at a record high, with the STOXX 600 up 0.4%.
• Retail stocks led the gains, rising by 2.1%.
• The technology sector showed signs of recovery, with a 0.3% increase.
• Investor focus is shifting towards upcoming interest rate decisions from the U.S. Federal Reserve and European Central Bank.

Retail Sector Leads Gains

The retail sector was the standout performer in the European markets, with several companies posting impressive gains. Notable performers included:

• JD Sports: Up between 1.3% and 3.2%.
• Kingfisher: Also saw a rise in its stock price.
• Howden Joinery: Experienced similar upward movement.

This surge in retail stocks reflects a broader recovery sentiment among investors, who are regaining confidence after the recent tech-related selloff.

Technology Sector Recovery

After facing significant pressure, the European technology index managed to recover slightly, increasing by 0.3%. Key highlights include:

• Alten: The engineering and technology consulting group led the recovery with a remarkable 7.7% rise following positive annual results.
• However, AI-related stocks like ASM International and Schneider Electric continued to struggle, dropping by 3.7% and 7.5%, respectively.

The initial panic caused by DeepSeek's AI model has led to a cautious approach among investors, who are now reassessing the valuations of tech stocks.

Market Sentiment and Future Outlook

Investor sentiment is currently influenced by the anticipation of interest rate decisions from major central banks. Analysts are closely watching the U.S. Federal Reserve and the European Central Bank, with expectations of a quarter-point rate cut already factored into the ECB's outlook.

Bank of America Global Research analysts suggest that the ECB may continue to cut rates, potentially reaching a terminal rate of 1.5% or lower, depending on economic data.

Notable Company Performances

Several companies reported significant movements in their stock prices:

• Sartorius: Jumped 11.5% after reporting better-than-expected fourth-quarter earnings and strong orders in bioprocess solutions.
• Siemens Energy: Rose 7.5% following a preliminary first-quarter revenue that exceeded market expectations.
• Netcompany Group: Faced a sharp decline of 16.9% after posting fourth-quarter revenue below market expectations.

Conclusion

The recovery of European shares signals a potential stabilization in the market following the recent tech selloff. As investors shift their focus to upcoming economic indicators and central bank decisions, the market's direction will depend on how these factors unfold in the coming weeks. The resilience shown by the retail sector and the cautious recovery in technology stocks may set the stage for a more balanced market environment moving forward.

Sources

• European shares close at record high as tech jitters abate | Reuters, Reuters.