European Markets — European Stocks Slide as Oil Surges Above $110 and AI Earnings Loom
European stock markets fell for a second straight session on Tuesday as rising oil prices and renewed geopolitical tensions dampened investor sentiment ahead of major corporate earnings reports.
The pan-European STOXX 600 declined 0.6%, following a drop of nearly 1% on Monday. Semiconductor stocks were among the biggest losers, with ASML and ASMI each falling more than 3%.
Brent crude prices rose above $110 a barrel, reaching their highest level in five months. Concerns over energy supplies grew after Yemen’s Iran-aligned Houthi group announced on Monday that it had launched attacks on Saudi energy facilities, airports and military targets.
The surge in oil prices has heightened concerns among investors because more expensive energy can raise operating costs for businesses and household expenses. The developments have also increased uncertainty surrounding the broader economic outlook.
Political unrest in France added to market caution. Widespread protests against austerity measures underscored the government’s challenges in addressing its substantial budget deficit.
French government bond yields edged down after registering their largest single-day increase in about a month. French cities remained calm overnight under curfews imposed following unrest the previous weekend, while protest groups announced plans for additional demonstrations the following Saturday.
Pia Fromlet, an economist at SEB, said the protests had heightened concerns over France’s public finances and the extent of austerity needed to significantly reduce the deficit. French shares continued to decline alongside other European equities.
Currency markets showed mixed movements. The dollar index slipped 0.2% to 101.77, while the euro advanced 0.2% to $1.122. The Japanese yen gained 0.2% after an auction of long-dated Japanese government bonds drew record demand.
Investors were also monitoring reports that the Bank of Japan could increase its inflation forecast for the next fiscal year in projections expected later in October. Meanwhile, Nasdaq futures fell 0.3% in the United States after technology stocks recovered some losses during Monday’s trading session.
Corporate earnings, particularly from companies involved in artificial intelligence, are becoming a central focus for investors. Market participants are looking for signs that consumer spending and the wider economy remain resilient. At the same time, they are questioning whether the enormous sums being invested in AI infrastructure will deliver adequate financial returns.
South Korean AI infrastructure company Elice Group suffered a steep decline during its stock market debut, with shares plunging nearly 30% and trading below their initial public offering price.
Quarterly results from SpaceX and Netflix were scheduled for Tuesday, while Meta and Tesla were due to release their results later in the week.
Ninghui Liu, head of investment strategy and research for Asia-Pacific at State Street Investment Management, said investors were increasingly questioning whether returns from AI capital expenditure would be sufficient to justify the associated financing costs.
Other major assets also declined. Gold fell 0.4% to $4,122 an ounce, while Bitcoin dropped 0.7% to $81,339.5. Ether lost 0.6%, reaching $2,383.4.
The Canadian dollar strengthened after voters in Alberta rejected separation from Canada in the province’s first-ever referendum on the issue.
Investors were also awaiting speeches from European Central Bank officials Martin Kocher and Olli Rehn, as well as Megan Greene, a member of the Bank of England’s Monetary Policy Committee. Their remarks were expected to influence market expectations for interest rates.
With energy prices elevated, political uncertainty persisting and questions mounting over the profitability of AI investments, investors remained cautious as the latest corporate earnings season continued.
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