The pan-European STOXX 600 fell 1.8% to close at a one-month low of 561.62 points, its worst day since August. Major regional markets such as Germany’s DAX and France’s CAC 40 fell 1.8% and 1.9% respectively. Reflecting investor jitters, the volatility gauge rose 2.7 points to 22.89, its highest level since a US regional bank sell-off in mid-October.
“Higher volatility means higher anxiety across the market” reflecting “AI valuations, what the Fed might do next and uncertainty around US economic data and long-term borrowing costs,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
“The higher the volatility, the greater the chances of a deep correction in the market.” Global investor sentiment remains subdued, with expectations high for Nvidia to deliver standout results on Wednesday. In Europe, shares of AI equipment makers fell. Siemens Energy fell 6.4% and Schneider Electric fell 2.4%, while ABB shares fell 4.1% after the company reaffirmed its top-line growth forecast, disappointing investors.
Nvidia, with its dominance in AI chips, has been the bellwether for a trend fueling gains in tech and infrastructure stocks worldwide. However, the concern is that the AI rally has overvalued related sectors.
Losses were across the board, with European banking stocks down 2.9% and the biggest drag on the STOXX index.
Auto stocks fell 2.9%, Stellantis fell 4.4%. Miners fell 2.6%, while tech stocks shed 1.8%.
Traders are also cautious ahead of Thursday’s long-delayed US jobs report. While private surveys pointed to a softening labor market, hawkish comments from Fed policymakers dampened expectations for an interest rate cut in December. In other moves, British online supermarket and technology group Ocado fell 17.4% after US partner Kroger said it would close three automated warehouses in January, dealing a major blow to the Ocado investment story. Umicore fell 14.3% after GroepBrussel Lambert (GBL) cut half its stake in the company. Roche rose 6.8% after its experimental oral drug Giradstrant was shown to reduce the risk of recurrence of a common form of breast cancer after surgery.
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