TLDR
- European chip manufacturers experienced significant declines Friday, with several companies losing more than 10%
- The downturn mirrored Thursday’s brutal session on Wall Street, where the Philadelphia Semiconductor Index plunged 4.3%
- Despite TSMC’s impressive 77% quarterly profit increase, its U.S.-traded shares declined 2.3%
- The STOXX 600 index across Europe retreated 0.6%, while the technology sector slumped 2.3%
- Escalating Middle East conflicts contributed to market uncertainty, with Burberry reporting reduced tourist spending
European chip manufacturers experienced a brutal trading session Friday, as the previous night’s Wall Street semiconductor rout spread across the Atlantic. Losses were extensive throughout both markets.
Netherlands-based chip equipment giant ASML plunged approximately 6%. ASM International posted comparable losses. BE Semiconductor retreated 6.3%, Soitec declined 7.1%, Aixtron dropped 7.4%, STMicroelectronics tumbled 7.6%, Siltronic fell 7.2%, and AMS-Osram posted the steepest decline at roughly 10%.
Across the Atlantic, Thursday saw the Philadelphia SE Semiconductor Index crater 4.3%. Companies producing memory chips suffered the most severe damage. SanDisk, Western Digital, Seagate Technology, and Intel posted losses ranging from 5.8% to 12.6%.
The Nasdaq 100 closed Thursday’s session down 1.6%, while the S&P 500 retreated 0.5%. Semiconductor stocks served as the primary weight on both indices.
The market turbulence occurred despite positive broader economic indicators and an encouraging start to second-quarter corporate earnings announcements.
TSMC’s Exceptional Performance Couldn’t Stop the Slide
Taiwan Semiconductor Manufacturing unveiled a remarkable 77% quarterly profit surge, representing one of the sector’s most impressive performances this earnings season. The figures significantly exceeded analyst projections.
Nevertheless, TSMC’s American depositary shares still dropped 2.3% Thursday. The decline illustrated how elevated market expectations have become for semiconductor companies, which have rallied nearly 70% year-to-date.
Positive guidance from ASML similarly failed to halt the downward momentum. Market participants appeared to be taking profits from a sector that had experienced extraordinary gains this year, irrespective of strong financial results.
Middle East Conflicts Intensified Market Anxiety
The semiconductor sector wasn’t facing challenges in isolation. Escalating tensions in the Middle East amplified investor concerns throughout global financial markets Friday.
Iran announced new strikes targeting American installations in the Gulf region. This development pushed crude oil prices to their highest level in a month and sparked concerns about returning inflationary pressures.
Burberry dropped 4.5% following the luxury brand’s statement that Middle Eastern hostilities were dampening tourist expenditure across Europe. This development pressured the luxury goods sector, which had recently shown relative strength.
The pan-European STOXX 600 benchmark traded down 0.6% during mid-morning European hours. The index appeared headed for modest weekly losses, pushing its two-week decline to approximately 2%.
Utility stocks advanced 1.3%, as capital flowed toward more conservative market segments. Market strategists observed that the rotation trade faced headwinds from climbing yields and elevated borrowing costs.
Sweden’s Saab climbed 5.5% after delivering second-quarter operating profit that surpassed forecasts. Norway’s Tomra Systems, a recycling equipment manufacturer, soared 14.7% on encouraging financial results. Volvo Group edged up 0.5% after announcing a 35% second-quarter profit jump.
The European Central Bank is broadly anticipated to maintain current interest rates at its July 23 policy meeting, although market pricing still reflects expectations for an additional rate increase in September.
