Europe
European equities tracked global declines, with the STOXX Europe 600 Index finishing over 2% lower as concerns about inflated valuations in AI-related stocks extended across the region. Reduced expectations for a U.S. Federal Reserve rate cut also dampened sentiment. Major country indexes weakened, including France’s CAC 40, Germany’s DAX, and Italy’s FTSE MIB. The UK’s FTSE 100 also declined amid shifting interest rate expectations.
Economic data offered a mixed yet somewhat resilient outlook. The eurozone’s November composite PMI remained in expansion territory at 52.4, supported by continued growth in the services sector. However, manufacturing activity slipped slightly back into contraction. Germany’s output continued to expand, though at a slower pace, while France saw notable improvement as its private sector neared the growth threshold.
Consumer confidence across the eurozone held steady at an eight-month high, though it slightly lagged expectations. In the UK, inflation continued to ease, falling to 3.6% in
October. Core inflation also moved lower, reinforcing the view that another Bank of England rate cut may be approaching. However, BoE officials emphasized that wage growth remains uncomfortably high, suggesting that policymakers will remain cautious. Overall, Europe’s economic backdrop shows gradual stabilization, even as global uncertainties persist.
United States
U.S. equity markets ended the week lower despite a mix of encouraging corporate earnings and stronger-than-expected economic reports. Investor sentiment was dominated by renewed concerns that the rapid growth in artificial intelligence may not yet translate into profits sizable enough to justify significant corporate spending. These worries weighed heavily on technology stocks, with the Nasdaq Composite seeing the sharpest declines. The S&P 500 fell roughly 4.4% from its late-October high, while mid- and small-cap indexes also posted losses, though to a lesser extent.
One of the most closely watched events of the week was NVIDIA’s quarterly earnings. The company reported record revenue driven by robust demand for its AI chips and delivered a strong outlook for the coming quarter. While markets initially reacted positively, sentiment reversed by midday, highlighting ongoing uncertainty around the sustainability of AI-driven growth.
Labor market data added complexity to the macro picture. The delayed September jobs report showed a stronger-than-expected gain of 119,000 jobs, but unemployment ticked up to 4.4%, reaching a four-year high. Investors are now focused on the Federal Reserve’s upcoming December meeting. Market pricing suggests nearly a 70% probability of a rate cut, helped by supportive comments from New York Fed President John Williams. Meanwhile, falling Treasury yields boosted bond performance, although municipal bonds lagged due to heavy issuance.
Asia & Other Markets
In Asia, market sentiment was similarly pressured, particularly in Japan and China, where technology and AI-related stocks faced sharp corrections. Japan’s Nikkei 225 fell over 3% as investors reassessed high valuations in the country’s fast-growing tech sector. The government approved a substantial stimulus package worth approximately USD 135 billion, aimed at supporting industries such as shipbuilding and artificial intelligence while easing cost pressures on households. However, concerns about long-term fiscal sustainability weighed on the yen, which weakened against the U.S. dollar. Japan’s 10-year government bond yield briefly touched a 17-year high, reflecting expectations of gradually shifting monetary conditions. Inflation remained above the Bank of Japan’s target, adding further pressure.
China’s markets also posted notable losses. The CSI 300 Index declined for a second consecutive week, dragged down by concerns over stretched valuations in AI names and broader uncertainty in the domestic economy. With no major economic indicators released, focus shifted to policy reports indicating that China is preparing additional measures to support its deeply troubled property sector. Potential initiatives include mortgage subsidies and tax incentives to stimulate homebuying. The property downturn, now in its fourth year, continues to weigh heavily on growth, with recent data showing accelerating declines in both new and existing home prices. Analysts warn that ongoing weakness could further strain China’s financial system if stability measures fall short.
Looking Ahead –
Overall, the week underscored that markets remain highly sensitive to AI expectations, interest rate decisions, and regional policy shifts, reminding investors that diversification, patience, and a long-term perspective are essential in navigating the current environment.
