European markets opened significantly lower on Friday, mirroring a retreat in Asian shares and a decline on Wall Street the previous day. Investors are re-evaluating expectations for interest-rate cuts while expressing concern over high valuations of prominent US technology and AI stocks.
“Markets are down across the board as investors fret about cracks in the narrative that has driven the tech rally over the past few years,” noted Dan Coatsworth, head of markets at AJ Bell. He highlighted ongoing worries regarding “rich equity valuations” and the influx of billions into AI investments coinciding with a fragile jobs market.
The overall sentiment across Europe was negative as UK government bond yields surged. Reports emerged that Chancellor Rachel Reeves had abandoned plans to raise income tax rates in the upcoming Autumn Budget, which created apprehension about a potential shortfall in public finances. The ten-year gilt yield climbed above 4.54% before slightly easing.
Consequently, London equities faltered, with bank shares heavily impacted amid growing concerns over a tightening fiscal environment. Around 11:00 CET, the FTSE 100 fell by more than 1.1%. The European benchmark Stoxx 600 was down nearly 1%, while Germany’s DAX dipped more than 0.7%, and France’s CAC 40 fell close to 0.7%. The Madrid and Milan indexes also reported declines of 1.2% and 1%, respectively. Despite the widespread downturn, Coatsworth remarked that “a 1% decline in the FTSE 100 is not out of the ordinary for one-day movement when markets are feeling grumpy.”
On the corporate side, luxury group Richemont emerged as a bright spot, soaring 7.5% after exceeding first-half forecasts. Siemens Energy saw its shares jump over 10% following an uplift in targets for the financial year 2028. In contrast, French gaming company Ubisoft delayed its financial report for the past six months, leading to a suspension of its shares after an earlier drop exceeding 8%.
Meanwhile, across the Atlantic, Wall Street experienced one of its weakest sessions since April on Thursday, with the S&P 500 and the Dow Jones Industrial Average both falling 1.7% from record highs, while the tech-heavy Nasdaq dropped 2.3%. Major AI-linked companies faced significant selling pressure, including Nvidia, which decreased by 3.6%, Super Micro Computer down 7.4%, Palantir falling 6.5%, and Broadcom losing 4.3%. Oracle shares were also down by more than 4%. The substantial gains in the tech sector this year have evoked comparisons to the dot-com boom, raising doubts about future price increases.
Expectations for an interest-rate cut from the US Federal Reserve in December have diminished, with market predictions indicating only a slight chance of a rate change this year.
Asian markets reflected the negative sentiment, particularly as new data revealed that China’s factory output grew at its slowest rate in 14 months, rising only 4.9% year-on-year in October—down from 6.5% in September and missing market expectations. Fixed-asset investment also weakened due to ongoing issues in the property sector.
South Korea’s Kospi led the regional losses, plummeting 3.8% amid heavy selling of technology shares, with Samsung Electronics slipping 5.5% and SK Hynix dropping 8.5%. Japan’s Nikkei 225 reversed Thursday’s gains with a nearly 1.8% decline, while Hong Kong’s Hang Seng fell 2%, and the Shanghai Composite slipped 1%.
Conversely, oil prices saw an uptick, with Brent crude rising nearly 1.6% to $63.99 a barrel, and West Texas Intermediate increasing by 1.8% to $59.76. The dollar strengthened slightly to ¥154.55, while the euro traded at $1.1637.
