Europe: Shares stumble at end of best month since June on AI worries

[BENGALURU] European shares dropped on Friday (Oct 30), hammered by a global tech sell-off that shaved billions off the market values of some chip heavyweights, ending a largely strong month on a sour note.

The pan-European Stoxx 600 index closed 0.4 per cent lower at 646.75 points, despite recording its best month since June.

Results from Amazon and Intel in the US rekindled concerns about the high costs of building out artificial intelligence infrastructure and prompted a pullback from technology names worldwide.

“The message from investors is becoming clearer: strong AI demand is no longer enough on its own,” Daniela Hathorn, senior market analyst at Capital.com, said.

The European technology sector index fell 2.8 per cent for its worst day since Jul 7 and led sectoral declines. AT&S, Soitec and Technoprobe led losses on the Stoxx 600, with declines ranging from 9 to 13 per cent.

Robust earnings in Europe this quarter have offered some support to stocks, but the drop on Friday shows how quickly bullishness can evaporate if global sentiment shifts.

“The market is trying to wrestle with the equation. A huge amount of capex is being spent, relative to the timeline of a return on investment. And at the moment, they don’t have an answer to that,” Michael Hewson, chief analyst at MCH Market Insights, said.

Growth defies headwinds

Separately, data showed the eurozone economy grew faster than predicted last quarter, displaying exceptional resilience to headwinds from expensive energy, even as surging borrowing costs and rapid inflation cloud the outlook.

Additionally, French consumer prices rose more than expected in October, recording the highest inflation rate since December 2023.

SEE ALSO

European shares ease as AI-driven tech selloff deepens

Investors are already grappling with political unrest in the eurozone’s second-largest economy, at a time when the country faces mounting pressure from elevated government debt, driving French bond yields to multi-year highs.

Universal Music Group jumped 7.9 per cent, topping the Stoxx 600, after posting a pick-up in subscription streaming revenue in the third quarter. The media sector rose 1.6 per cent.

BP rose marginally after posting third-quarter net income ahead of expectations, while German sportswear maker Puma advanced 5.6 per cent after a quarterly sales beat.

Sanofi gained 4.7 per cent after the French pharmaceutical firm reported third-quarter results ahead of analyst expectations and lifted its outlook.

Among other movers, Bayer gained 5.5 per cent after winning a trial on Thursday over claims by three women that its Roundup weedkiller caused their cancer. REUTERS