European stock markets dropped to their lowest point in a week on Monday. This decline mirrored a global trend where investors are avoiding risk due to two main concerns: the technology sector being possibly overpriced (a potential “AI bubble”) and the growing belief that the US Federal Reserve will not cut interest rates soon.
The main European stock index, the STOXX 600, fell 1.1%, and major national markets like Germany and France also dropped over 1.2% each. Banking stocks in Europe were the biggest reason for this overall decline, falling more than 2%. Investor mood is delicate globally, especially with high expectations for Nvidia’s earnings report coming on Wednesday, which is increasing concerns about an AI-related stock bubble.
In Europe, companies that make AI-related equipment, such as Siemens Energy and Schneider Electric, saw their stocks fall, and ABB’s shares dropped 4% after its growth outlook disappointed investors.
Additionally, traders are being careful ahead of the important US jobs report due on Thursday. Although some data suggests the job market is weakening, comments from most Federal Reserve officials suggest they are less likely to cut interest rates in December. The one positive note was the Swiss drug company Roche, whose stock jumped nearly 6% after sharing good results from a late-stage trial for its breast cancer medicine.
On the FX front, The Japanese yen got stronger against the dollar in Asian trading, bouncing back from its weakest point in over nine months. This happened because traders became less confident that the US Federal Reserve would cut interest rates next month, leading to a general move away from riskier investments across various markets.
The US dollar weakened 0.3% against the yen, dropping to 154.885, as traders sought safety in the yen while stocks, gold, and Bitcoin were being sold off.
The overall dollar index, which measures the dollar against other major currencies, was 0.1% weaker at 99.448. Meanwhile, the euro gained 0.1% against the dollar, ending a three-day slide. The Australian dollar fell slightly (0.2%) to 0.64785 after meeting minutes showed that the Reserve Bank of Australia (RBA) is questioning if its current interest rate of 3.6% is still strict enough, especially noting a rise in loans to property investors.
The British pound remained steady at 1.3157, and the New Zealand dollar weakened slightly (0.1%) to 0.56475
Currency Power Balance