The pan-European STOXX 600 fell 1.8% to 561.62 points to close at a one-month low, registering its worst day since August. Major regional bourses such as Germany’s DAX and France’s CAC 40 fell 1.8% and 1.9%, respectively. Reflecting investor nervousness, a volatility gauge jumped 2.7 points to 22.89, its highest level since the U.S. regional bank sell-off in mid-October.
“A higher volatility means higher anxiety throughout the market” reflecting “doubts regarding AI valuations, what the Fed might do next, and the uncertainty around the U.S. economic data and around the long-term borrowing costs,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
“The higher the volatility, the higher the chances of a deeper market correction.” Investor sentiment globally has been fragile, with expectations high for Nvidia to deliver standout results on Wednesday. In Europe, shares in AI equipment makers dipped. Siemens Energy lost 6.4% and Schneider Electric fell 2.4%, while ABB’s shares dropped 4.1% after the company reaffirmed its top-line growth forecasts, disappointing investors.
Nvidia, with its dominance in AI chips, has become the bellwether for the trend which has sparked gains in tech and infrastructure stocks across the globe. However, the worry is that the AI rally has made related sectors overvalued.
Losses were across the board, with European banking stocks down 2.9% and among the biggest drags on the STOXX index. Auto stocks lost 2.9%, with Stellantis falling 4.4%. Miners declined 2.6%, while tech stocks lost 1.8%. Traders are also cautious ahead of the long-delayed U.S. jobs report due on Thursday. While private surveys have pointed to a softening labour market, hawkish remarks from Fed policymakers have dampened expectations of an interest rate cut in December. Among other moves, British online supermarket and technology group Ocado slumped 17.4% after U.S. 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 by half its stake in the company. Roche rose 6.8% after its experimental oral drug giredestrant was shown to cut the risk of recurrence of a common form of breast cancer after surgery.
