European shares pulled back from record highs on Friday, with technology shares tracking global sector weakness, while Zalando fell after Germany's financial regulator launched a probe into the retailer's accounts.
The pan-European STOXX 600 index closed 0.7% lower, narrowly marking gains for the week.
Shares of Zalando slid 6.3% after BaFin launched an investigation into the online fashion retailer's 2025 financial statements, citing evidence the company breached accounting regulations. The broader retail sector lost 1.6%.
Meanwhile, uncertainty around the global technology sector prevailed, with investors focused on a surge in memory chip costs as a result of strong AI-driven demand. Asian equities fell sharply overnight, while Wall Street's tech-heavy Nasdaq flip-flopped between gains and declines.
"The AI narrative in markets right now is all over the place, shifting from questions about ROI from the AI spend, to exuberance about the AI spend," said Richard Reyle, chief investment officer at Questar Capital Partners.
"These conflicting narratives suggest that the market is in the process of picking winners and losers in this space, and that is a process that will take time."
In Europe, the tech sector fell 1.2%.
Chipmakers Infineon and STMicroelectronics slipped 4.5% each. On the other hand, semiconductor equipment makers BE Semiconductor and ASML dropped 2.2% and 1%, respectively.
AI equipment maker Schneider Electric shed 1.3%. Telecom companies Ericsson and Nokia were also down 1.7% and 6.5%, respectively.
The benchmark STOXX 600 marked modest weekly gains, as easing oil supply concerns following the partial reopening of the Strait of Hormuz helped Brent crude retreat to pre-conflict levels, while Europe's smaller tech exposure helped cushion the losses seen in regional equities.
The STOXX tech index now outperforms the S&P 500 tech sector on an annual, monthly and quarterly basis, also due to the Wall Street index's bigger exposure to software companies.
U.S. inflation broke above 4% for the first time in three years in May, reinforcing expectations for a rate hike from the Federal Reserve this year.
Traders are pricing in another 25 basis point interest rate hike by the European Central Bank by year-end, according to LSEG-compiled data.
Among others, automaker Volkswagen shares were up 3.9%. A report said the company aims to slash up to 100,000 jobs over the next few years.
London-listed shares of Wise climbed 9.6% after the money transfer company reported strong growth in customers and announced a share buyback plan worth $500 million.
