European shares close at record high as tech jitters abate

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By Nikhil Sharma and Johann M Cherian

Jan 28 (Reuters) - European shares closed at a record high on Tuesday with retail stocks leading broader gains, as selling pressures ebbed a day after the Chinese AI startup DeepSeek triggered a global market rout.

The pan-European STOXX 600 .STOXX closed up 0.4%, with retailers .SXRP leading sectoral gains with a 2.1% rise.

JD Sports JD.L, Kingfisher KGF.L and Howden Joinery HWDN.L were trading between 1.3% and 3.2%.

The European technology index .SX8P, which took a hit in the previous session, edged up 0.3%, with engineering and technology consulting group Alten LTEN.PA in the lead with a 7.7% rise after reporting annual results.

However, AI-related stocks such as ASM International ASMI.AS and Schneider Electric SCHN.PA dropped further by 3.7% and 7.5%, respectively.

DeepSeek's discount artificial intelligence model and its soaring popularity rattled investors globally on Monday, who dumped technology shares and questioned the sky-high valuation of AI bellwethers.

Investor focus is also on interest rate verdicts from the U.S. Federal Reserve and European Central Bank later in the week.

With a quarter-point rate cut already priced in for the ECB, all eyes will be on policymakers' remarks to set the tone for the easing cycle for 2025.

"Based on recent ECB speakers, the next two cuts seem to be consensual now, but the path thereafter not. Our view remains that data will ultimately force the ECB to continue cutting to a terminal of 1.5% if not lower," said a team of Bank of America Global Research analysts led by Ruben Segura-Cayuela.

EUROPEAN BANKS

Sartorius SATG.DE jumped 11.5% to top the STOXX index after the German pharmaceutical equipment supplier reported better-than-expected fourth-quarter earnings as well as strong bioprocess solutions orders.

Siemens Energy ENR1n.DE rose 7.5% after the offshore wind turbine maker reported a preliminary first-quarter revenue above market expectations.

The company, which also provides electric hardware for AI infrastructure, slumped 20% on Monday.

Spain's unemployment rate in the fourth quarter fell to its lowest in more than 16 years, as the economy outperforms its neighbours. The IBEX benchmark index .IBEX rose 1.3% to touch a 15-year high.

In Italy the main index .FTMIB dipped 0.1% after Prime Minister Giorgia Meloni said she had been placed under judicial investigation over her country's surprise release of a Libyan police officer wanted by the International Criminal Court.

European bank earnings on Thursday will also be a key event for the markets as investors worry that U.S. President Donald Trump's administration will slash red tape for U.S. banks, potentially disadvantaging European institutions.

Netcompany Group NETCG.CO slumped 16.9% after the IT consultancy firm posted fourth-quarter revenue below market expectations.