European stocks fell on Monday, losing ground after a strong month in November. Investors became more cautious, leading to a wave of “risk aversion” across the markets.
The main European index, the STOXX 600, dropped 0.4%. Key national markets in Germany and France saw similar declines of 0.5%. Following a solid run in November, which had calmed fears about a potential bubble in Artificial Intelligence (AI) stocks, traders are now looking for new reasons to buy. The main focus this week will be on new economic reports and early signs of how much people spent over the Black Friday and Cyber Monday holiday shopping period.
The biggest reason for the overall market slump was the industrial sector, which dropped by 1.3%. This slide was mainly due to two areas: Airbus and defence stocks. Planemaker Airbus saw its shares fall 2.1% after it had to recall and order immediate software repairs for 6,000 jets globally, more than half of its worldwide fleet.
Meanwhile, shares in major defence companies, including Hensoldt, Rheinmetall, and Leonardo, also dropped by more than 3% each.
Finally, London-listed Impax Asset Management also saw its stock fall by 3.6% after releasing its yearly financial results. On the geopolitical front, officials from the U.S. and Ukraine held encouraging talks on Sunday about a possible peace deal with Russia, though US officials remained cautiously optimistic given the obstacles to ending the three-year conflict.
On the FX front, the yen grew stronger on Monday. This was largely because the Governor of the Bank of Japan, Kazuo Ueda, gave a very strong hint that the central bank might consider raising interest rates at its policy meeting in December. This unexpected possibility caused the yen to rally, pushing the US dollar down 0.4% against it to 155.51 yen.
Meanwhile, the dollar struggled overall because investors are increasingly betting that the US central bank will cut interest rates later this month.
This environment helped the euro climb to a two-week high of $1.16155. In contrast, the British pound (sterling) dipped 0.2% to $1.3211, taking a pause after its best weekly performance in over three months, which had followed the UK’s recent budget announcement.
Finally, cryptocurrencies saw a sharp drop, with Bitcoin falling 5.7% to $85,949 and ether dropping 6.4% to $2,828.41.
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