Chip stocks drag European shares lower after ASML's warning

By Sanchayaita Roy, Sukriti Gupta and Twesha Dikshit

(Reuters) -European shares fell on Wednesday, with chip stocks hit hard after ASML flagged a hit to its revenue growth, while reports of U.S. President Donald Trump considering firing Federal Reserve Chair Jerome Powell also hit sentiment.

The pan-European STOXX 600 index closed 0.6% lower, marking its fourth straight day of losses. Most regional bourses also slipped, with German blue-chips off 0.2%.

European equities fell sharply just before the close after Bloomberg reported that Trump is likely to fire Fed Chair Powell, but Trump said later he is not planning to do so.

"This is something where the market views stability as a good thing," said Joe Saluzzi, partner and co-founder at Themis Trading.

"It's a volatile situation. I don't think the market is in the opinion that we need a new Fed chair."

Dutch firm ASML was the biggest drag on the STOXX, tumbling 11.4% - its biggest drop in nine months - after warning it may not achieve growth in 2026, despite second-quarter bookings beating expectations.

Other chip stocks including BE Semiconductor, ASMI and STMicroelectronics dropped between 2.1% and 5.2%.

European auto stocks fell 1.8%, led by Renault, sliding 18.5% after the French carmaker surprised investors with a profit warning.

Another earnings-driven decline was Fuchs, down 12.9% after the German lubricant supplier cut its outlook for 2025 and posted weaker than expected second quarter results.

The latest earnings forecasts released on Tuesday showed a deteriorating outlook for European corporate health, as Trump's most recent tariff statements added to business uncertainty.

"Looking at the earnings season, it's expected that Europe is going to be hit the most,” said Anthi Tsouvali, multi-asset strategist at UBS Global Wealth Management, citing tariff-driven uncertainty, weak business sentiment and margin pressure from stockpiling.

EU's trade chief Maros Sefcovic headed to Washington for tariff talks, and is expected to meet U.S. Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer, an EU spokesperson told Reuters.

On the higher side, shares in asset manager Partners Group rose 5.1% to the top of the STOXX after the firm reported better-than-expected half-yearly assets under management and confirmed its full-year outlook.

Spirits maker Diageo closed 0.6% higher after jumping as much as 4.5% earlier in the day. CEO Debra Crew stepped down after two years in the job.

On the data front, Britain's annual rate of consumer price inflation unexpectedly rose to its highest in over a year at 3.6% in June, up from 3.4% in May.

(Reporting by Sanchayaita Roy, Sukriti Gupta and Twesha Dikshit in BengaluruEditing by Vijay Kishore, Nivedita Bhattacharjee and Frances Kerry)