European markets opened significantly lower on Friday, following a retreat in Asian shares in the morning and Wall Street’s tumble on Thursday, as investors reassessed the outlook for interest-rate cuts and questioned the lofty valuations of leading US technology and AI stocks.
“Markets are down across the board as investors fret about cracks in the narrative that’s driven the mother of all tech rallies over the past few years," said Dan Coatsworth, head of markets at AJ Bell. The key concern is "about rich equity valuations and how billions of dollars are being spent on AI just at a time when the jobs market is looking fragile", he added.
In Europe, sentiment was gloomy on Friday morning as UK government bond yields jumped following reports that Chancellor Rachel Reeves has abandoned plans to raise income tax rates in this month’s Autumn Budget. The ten-year gilt yield climbed above 4.54% before easing slightly. If confirmed, the chancellor's move — first reported by the Financial Times — would leave a shortfall in the public finances.
London equities weakened, with bank shares among the worst performers on the FTSE 100 as investors digested the prospect of a tighter fiscal backdrop.
By around 11:00 CET, the FTSE 100 was down more than 1.1%, the European benchmark Stoxx 600 had lost nearly 1%, the DAX in Frankfurt dipped more than 0.7% and the CAC 40 in Paris fell nearly 0.7%. The Madrid and Milan indexes were down 1.2% and 1% respectively.
“Despite the doom and gloom, the scale of the market pullback wasn’t severe enough to suggest widespread panic," said Coatsworth, adding that "a 1% decline in the FTSE 100 is not out of the ordinary for a one-day movement when markets are feeling grumpy".
On the corporate front, luxury group Richemont was among the best performers, soaring 7.5% after beating forecast first-half results. Siemens Energy jumped more than 10% after the company raised its targets for the 2028 financial year. In other news, French Ubisoft delayed its financial report for the past six months; trading in its shares was suspended after an earlier drop of more than 8%.
Across the Atlantic, Wall Street endured one of its weakest sessions since April on Thursday, with the S&P 500 sliding 1.7% and the Dow Jones Industrial Average falling 1.7% from its record high set a day earlier. The tech-heavy Nasdaq dropped 2.3%.
Shares in major AI-linked companies came under heavy selling pressure, with Nvidia down 3.6%, Super Micro Computer off 7.4%, Palantir falling 6.5% and Broadcom losing 4.3%. Oracles lost more than 4%.
The sector’s extraordinary gains this year have prompted comparisons with the dot-com boom, fuelling doubts about how much further prices can rise.
Expectations for a further US interest-rate cut in December have also diminished, with market pricing now suggesting only a marginal chance the Federal Reserve will move again this year.
Asian markets mirrored the downbeat tone as fresh data showed China’s factory output grew at its slowest pace in 14 months in October, rising 4.9% year on year — down from 6.5% in September and missing expectations. Fixed-asset investment also weakened, dragged down by ongoing softness in the property sector.
South Korea’s Kospi led regional losses, tumbling 3.8% amid heavy selling of technology shares. Samsung Electronics dropped 5.5% and SK Hynix slid 8.5%, while LG Energy Solution lost 4.4%. Taiwan’s Taiex declined 1.8%.
Japan’s Nikkei 225 shed nearly 1.8%, reversing Thursday’s gains, with SoftBank Group plunging 6.6%. In China, Hong Kong’s Hang Seng fell 2% and the Shanghai Composite slipped 1%.
Meanwhile, oil prices strengthened. Brent crude rose nearly 1.6% to $63.99 a barrel, and West Texas Intermediate added 1.8% to $59.76. The dollar was slightly firmer at ¥154.55, while the euro traded at $1.1637.
