Why European Stocks Rose While Asia's Semiconductor Selloff Deepened

On Tuesday, July 28, 2026, a brutal selloff in global semiconductor stocks sent shockwaves through Asian markets, with South Korea's KOSPI plunging more than 10% and triggering a circuit breaker . Yet, despite the chaos, European stocks managed to edge higher. Here is the breakdown of why Europe bucked the trend.

The Chip Rout: What Triggered the Selloff

The semiconductor selloff was triggered by two main fears :

1. Chinese competition: A report from The Information revealed that a Chinese state-backed company has begun mass-producing immersion deep ultraviolet (DUV) lithography machines — a key chipmaking tool long dominated by Dutch giant ASML .

2. AI spending doubts: Investors grew increasingly worried about the returns on the massive AI capital spending. Nvidia's fresh round of deals worth over $750 billion raised questions about "circular funding" — essentially, whether the spending was sustainable .

This hammered Asian chipmakers like TSMC, Samsung, and SK Hynix, and hit ASML ADRs (-8.5%) and Nvidia (-5%) . But Europe's benchmark STOXX 600 is less than 5% tech-weighted, limiting the damage .

The European Buffer: Strong Earnings from Unilever

The single biggest factor lifting European stocks was a blockbuster earnings report from Unilever. The consumer goods giant jumped as much as 6.8% — its biggest single-day gain since 2022 — after reporting second-quarter sales growth that beat estimates, helped by higher volumes and prices . Unilever reported underlying sales growth of 3.8% in the first quarter of 2026, with volume growth of 2.9% . Its strong performance lifted the entire consumer-staples sector, and luxury and consumer-focused stocks broadly rallied on earnings optimism .

Falling Oil Prices: A Tailwind for Europe

Oil prices fell another ~1% on Tuesday, hitting a one-week low, as the US and Iran paused military strikes and entered "good talks," raising hopes that shipping through the Strait of Hormuz could normalize . On Monday alone, Brent crude had already dropped ~7.5% to the mid-$80s on de-escalation hopes . Lower energy costs are a net positive for Europe's import-dependent economies and for consumer-discretionary margins, helping offset some of the tech-driven gloom .

Rate Uncertainty: A Mixed but Muted Factor

Rising odds of a US Federal Reserve rate hike as early as that week added to the risk-off mood globally and weighed on growth stocks, particularly in Asia . However, the net effect in Europe was modest. Lower oil prices eased some inflation pressure, and European markets had already priced in a more cautious central-bank stance, so the rate headwind was felt more acutely in Asia .

Sector Rotation: From Tech to Defensives

With tech under pressure globally, European investors rotated into consumer, luxury, and defensive stocks. The STOXX 600 gained about 0.3% to 646.75 by mid-session, marking its third consecutive day of gains . The personal care, drug, and grocery index led sectoral gains in the Stoxx benchmark, up 2.7% .

The Bottom Line

Europe's lighter tech weighting, a strong earnings day from consumer giants like Unilever, and the tailwind from falling oil prices together created enough of a buffer to let the market inch higher while Asia absorbed the full force of the semiconductor and AI-anxiety selloff. The divergence highlights how different market compositions and sector rotations can lead to sharply different outcomes even within a single global risk-off event.