European shares opened higher on Tuesday and were on track for their biggest quarterly rise in more than five years, boosted by optimism around artificial intelligence and signs of easing tensions in the Middle East.
The pan-European STOXX 600 index (.STOXX) was up 0.6% at 639.79 points, as of 0857 GMT, and hovered near a record high. The benchmark is poised for a third consecutive monthly gain and has climbed 9.7% for the quarter, its strongest such performance since October 2020.
Technology stocks (.SX8P) rose 1.7% and were set for their biggest quarterly jump since October 2001, underscoring robust demand for AI infrastructure. The sector is also on track to outperform its Wall Street counterpart (.SPLRCT) this month and quarter.
Chip equipment maker ASML (ASML.AS) rose 3.3% on Tuesday, while chipmakers STMicroelectronics (STMPA.PA) and Infineon (IFXGn.DE) added 2% and 2.3%, respectively.
Shares of Siemens Energy (ENR1n.DE) added 4.8% after the AI-equipment maker reiterated strong demand trends at a quarterly earnings call on Monday.
"What's different about Europe is: you're not being paying for that (economic) growth commonly... and with companies that are less exciting than U.S. tech, or maybe Asian semis, that's creating quite a lot of opportunities in attracting value stocks," said Rob Lancastle, portfolio manager at J O Hambro Capital Management.
"Around the rest of the world, you often pay a lot more and you have a lot more earnings risk," he added.
Global equities have rallied this quarter on AI enthusiasm, with the U.S. and Asia leading the charge, while Europe's smaller exposure to the tech sector has resulted in it playing catch up for most of this period.
Signs of easing Middle East tensions have also been a key driver this quarter as prices of oil slipped to pre-Iran war levels, prompting Barclays and J.P.Morgan to turn bullish on European stocks.
Travel and leisure stocks (.SXTP), which had taken a hit due to the conflict, also bounced back and are up over 19% this quarter.
Focus is on the ongoing annual European Central Bank conference, where investors are awaiting commentary from policymakers for clues on the outlook for monetary policy. Traders anticipate European interest rates to rise by another 25 basis points by year-end, according to LSEG-compiled data.
Among individual stocks, Abivax (ABVX.PA) jumped 33% on Tuesday after the French drugmaker reported positive topline results for its obefazimod study.
Among laggards, customer services firm Teleperformance (TEPRF.PA) fell 13% after U.S. peer Concentrix (CNXC.O) cut its profit forecast.
Software companies Capgemini (CAPP.PA) lost 2.1% and SAP (SAPG.DE) dropped 1.3%.
