European shares hold steady as tech stocks gain amid Middle East ceasefire hopes

European equities traded little changed on Monday as gains in technology stocks helped offset broader market caution.

Investors continued to assess the outlook for a fragile ceasefire in the Middle East after the United States and Iran agreed to halt their latest round of hostilities.

The pan-European STOXX 600 index remained broadly unchanged at 636.13 points by 0709 GMT

Technology stocks led sectoral gains, with the index tracking the sector rising 1.1%.

Technology stocks recover after last week's selloff

The technology sector rebounded after suffering its sharpest weekly decline since mid-March.

The recovery was led by a sharp rally in shares of Nagarro.

Nagarro surged 90% after India's Persistent offered €81 per share to acquire the AI-led digital engineering company.

The proposed acquisition boosted sentiment across the broader technology sector.

The rebound came after investors had turned cautious last week over elevated valuations in artificial intelligence-related companies.

Those concerns weighed on technology stocks and contributed to increased market volatility.

The STOXX 600 index ended the previous week largely unchanged.

Investor sentiment had been pressured by expectations that central banks could raise interest rates to counter inflation driven by higher energy prices.

Middle East Developments remain in focus

Investors also continued to monitor geopolitical developments in the Middle East.

The United States and Iran exchanged fire over the weekend before agreeing to halt hostilities and resume talks.

While the ceasefire remained fragile, markets viewed the agreement as a positive step that could reduce immediate geopolitical risks.

Oil markets reflected the cautious optimism.

Crude prices edged 0.6% higher to around $72 per barrel as investors evaluated the outlook for crude shipments through the Strait of Hormuz under the interim ceasefire.

Despite lingering uncertainty, the continuation of the ceasefire encouraged a more constructive outlook among some market participants.

Brokerages turn more optimistic on European equities

The improving geopolitical backdrop prompted several brokerages to adopt a more positive view on European stocks.

JP Morgan became the latest brokerage to raise its year-end target for European equities.

The firm cited resilient corporate earnings and signs of improvement in the geopolitical environment as key reasons for its upgraded outlook.

The revised target reflected growing confidence that stronger company performance, combined with easing geopolitical tensions, could continue to support equity markets in the months ahead.

Attention turns to Central Bank commentary

Investors are now looking ahead to the European Central Bank's annual conference in Sintra, where policymakers are expected to provide further guidance on the outlook for monetary policy.

Market participants will closely scrutinise remarks from Federal Reserve Chair Kevin Warsh and European Central Bank President Christine Lagarde for signals on future interest rate expectations and the broader policy outlook.

Their comments are expected to shape investor expectations at a time when markets remain sensitive to inflation risks, energy prices, and ongoing geopolitical developments.