European Stocks Slide as AI Valuations and UK Tax Reversal Shake Markets

European stocks tumbled on Friday, rattled by concerns over inflated artificial intelligence (AI) valuations and broader global economic uncertainty. The pan-European Stoxx 600 fell 0.8% early in trading, with major indexes including the FTSE 100, DAX, and CAC 40 all closing lower, reflecting widespread investor caution. Market participants are wary that the AI sector, which has fueled significant growth this year, may be overheating.

Adding to market jitters, China’s economic slowdown intensified in October. Data revealed a contraction in fixed asset investment over the first ten months of the year, weaker retail sales, and slowing industrial output. These indicators have heightened concerns about global growth prospects, particularly as markets still digest significant losses from Wall Street, where tech-heavy indices like the Nasdaq Composite fell 2.3% amid AI valuation fears.

Back in the UK, government bond yields spiked as reports emerged that the Labour government was reconsidering a planned income tax increase in the Autumn Budget. The benchmark 10-year gilt yield climbed 7 basis points to 4.5%, while yields on 20- and 30-year bonds rose even more. Sterling also dipped roughly 0.2% against both the U.S. dollar and the euro, highlighting investor sensitivity to the tax reversal.

Corporate earnings provided some relief amid the volatility, with German insurer Allianz posting record results for the first nine months of the year. Operating profit surged 12.6% in Q3 to 4.4 billion euros ($5.1 billion), driven largely by strong performance in its Property-Casualty division. Allianz now expects full-year operating profit to reach at least 17 billion euros, lifting its shares by around 1% despite broader market declines.

Looking ahead, investors remain cautious. U.S. futures were largely unchanged Friday morning, reflecting uncertainty after Thursday’s Wall Street sell-off, while Asian markets fell overnight as traders digested both U.S. tech losses and China’s sluggish economic data. Analysts are watching closely for signals from central banks and earnings reports that could provide direction in an increasingly jittery global market.

source: cnbc