European stocks finished lower on Friday after giving up earlier gains, as investor sentiment weakened amid a rotation out of technology stocks driven by renewed concerns over AI overvaluations.
Germany’s DAX slipped 0.3%, France’s CAC 40 declined 0.2%, while the UK’s FTSE 100 fell 0.6%.
AI valuation fears outweigh Fed rate cut optimism
Market sentiment had initially improved earlier in the week after the U.S. Federal Reserve cut interest rates by 25 basis points and signaled the possibility of further easing next year. Fed Chair Jerome Powell’s less hawkish tone helped lift risk appetite globally.
U.S. markets responded positively, with the S&P 500 and Dow Jones Industrial Average closing at record highs on Thursday, although the Nasdaq lagged due to weakness in major technology stocks.
Those gains helped European equities open higher on Friday, tracking advances in Asian markets, as investors looked ahead to policy decisions from the European Central Bank and the Bank of England next week.
However, optimism faded quickly after Broadcom’s earnings outlook reignited fears of an AI-driven bubble, triggering a selloff across European stocks.
UK GDP contracts again
Economic data added further pressure after figures showed the UK economy contracted in October. Gross domestic product declined 0.1% month-on-month, matching September’s fall and missing expectations for modest growth.
Uncertainty surrounding the Autumn budget, presented by UK finance minister Rachel Reeves in November, likely discouraged both business investment and consumer spending.
The Bank of England is set to hold its final policy meeting of the year next week and is widely expected to cut interest rates by 25 basis points to 3.75%, as inflation continues to ease.
In contrast, German inflation rose to 2.6% in November, confirming preliminary estimates, while eurozone harmonised inflation stood at 2.3% year-on-year in October. The ECB is expected to leave rates unchanged, with inflation broadly aligned with its 2% target.
Broadcom margins raise AI profitability concerns
In corporate news, Capita said revenue in some business units fell short of expectations, although the outsourcing firm maintained its full-year profit guidance.
Broadcom remained in focus after forecasting first-quarter revenue above Wall Street estimates, while warning that margins would narrow due to a growing share of artificial intelligence-related sales.
The chipmaker’s deeper move into AI hardware has unsettled investors, who remain wary of the high costs and long-term profitability tied to massive AI investments.
Oil prices edge higher despite weekly losses
Oil prices ticked higher on Friday as concerns grew over potential supply disruptions linked to U.S. actions against Venezuelan oil exports.
Brent crude rose 0.1% to $61.33 a barrel, while WTI crude gained 0.2% to $57.71 a barrel.
Despite the daily gains, both benchmarks were headed for weekly declines after sliding about 1.5% on Thursday, as hopes of a Russia–Ukraine peace agreement raised expectations of increased Russian oil supply.
