<div id="readability-page-1">* Technology shares lead gains in Europe * Burberry ( BBRYF ) slides after recovery weighed down by Iran war impact * Watches of Switzerland ( WOSGF ) jumps on upbeat FY profit outlook * Markets see over two ECB rate hikes this year on inflation worries (Updates after markets close) By Twesha Dikshit and Avinash P May 14 (Reuters) - European shares closed higher on Thursday, after hitting the highest in a week with a boost from technology stocks, while investors remained cautious about developments in the U.S.-China talks. The pan-European STOXX 600 ended up 0.8% at 616.05 points on broad-based gains. The technology sector index jumped 2.6% led by semiconductor stocks, with STMicroelectronics up 5.4%, BE Semiconductor up 3.3% and Infineon jumping 5.7%. Germany's DAX advanced 1.3% and led regional bourses higher, with SAP adding 3.6%. Bank of America ( BAC ) said the software giant's ongoing cloud momentum and backlog growth of around 25% could boost revenue by double digits, supported by operating leverage and AI, alongside potential upside from capital deployment. However, the continent's exposure to AI hardware firms pales in comparison with its U.S. and Asian peers, prompting many investors to look beyond European markets. &#34;It's the theme that's been working against Europe for the last four years since the debut of ChatGPT in late 2022. That's been the most persistent reason for underperformance and more recently, it has to do with the energy imports and political instability,&#34; said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. The UK is the latest country to witness political upheaval in Europe after the ruling Labour party's Wes Streeting resigned as health minister, raising doubts on Prime Minister Keir Starmer's leadership. Global attention was also on the U.S.- China bilateral meeting in Beijing. Investors hoped President Donald Trump could encourage China to convince Iran to make a deal with Washington to end the war that has sent crude prices up to $100 a barrel. &#34;We await the developments in China ... all eyes are on the Middle East crisis for that to really be resolved,&#34; said Frédérique Carrier, head of investment strategy at RBC Wealth Management. Among others, luxury brand Burberry shed 6.8% after reporting fourth-quarter sales in line with expectations, while Watches of Switzerland ( WOSGF ) jumped 19.2% on forecasting full-year operating profit above expectations. Investment company 3i Group ( TGOPF ) slumped 12.7% after its key portfolio company Action's like-for-like sales growth slowed to 2.4% in 19 weeks to May 10 versus 6.8% a year ago. On the policy front, the European Central Bank's chief economist Philip Lane said interest rate hikes might be required to deal with inflation. Money markets currently price in more than two ECB rate increases this year. (Reporting by Twesha Dikshit and Avinash P; Editing by Nivedita Bhattacharjee and David Gregorio)</div>

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European shares closed higher, reaching one-week highs, driven by a 2.6% rise in technology stocks, particularly semiconductors. The pan-European STOXX 600 rose 0.8%, with Germany's DAX up 1.3%. Burberry's shares fell 6.8% due to concerns over the Iran war, while Watches of Switzerland surged 19.2% on positive profit forecasts. The ECB is expected to implement over two rate hikes this year amid inflation concerns. Political instability in the UK and ongoing U.S.-China talks are also influencing market sentiment.

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European shares end at one-week highs on tech boost