European Stocks Flat as Defence Gains Offset Tech Losses Amid U.S.-China Tensions

European stocks remained flat on Tuesday as gains in defence stocks balanced losses in the technology sector, which faced pressure from escalating U.S.-China tensions over semiconductor restrictions.

The pan-European STOXX 600 inched up 0.07% as of 0816 GMT. Technology stocks were the biggest laggards, dropping 0.9%, amid reports that the U.S. plans to tighten semiconductor export restrictions on China. Semiconductor giants STMicroelectronics and ASML slid 1.4% and 1.6%, respectively, while AI-exposed stocks Schneider Electric and Siemens Energy lost 1.3% and 2.2%.

Consumer goods leader Unilever saw its shares drop 3% after announcing CEO Hein Schumacher will step down, to be replaced by CFO Fernando Fernandez.

On the other hand, the European aerospace and defence sector surged over 1%, driven by reports that Germany’s potential new chancellor, Friedrich Merz, is in talks to approve €200 billion ($209.44 billion) in defence spending. German arms manufacturers Rheinmetall, Hensoldt, and Renk climbed 2.6%, 2.5%, and 6.1%, respectively.

Industrial conglomerate Thyssenkrupp soared 6% after its CEO confirmed plans for a shareholder meeting ahead of a warship division spin-off.

Investors remain cautious as geopolitical tensions and economic uncertainty continue to drive market fluctuations.