European stocks closed lower on Friday, despite earlier gains, as Wall Street saw a rotation from tech to value names due to fears about AI over-valuations.
The DAX index in Germany closed 0.3% lower, the CAC 40 in France fell 0.2% and the FTSE 100 in the U.K. declined 0.6%.
AI bubble fears overshadow Fed rate cut boost Global sentiment received a boost earlier in the week after the U.S. Federal Reserve cut interest rates by a quarter-percentage point, and also pointed at a further reduction next year as Chair Jerome Powell struck a much less hawkish stance than feared during a post-meeting conference.
Both the S&P 500 and the Dow Jones Industrial Average closed at record highs on Thursday, while the NASDAQ Composite lagged on weakness in the tech sector.
These gains had helped the European market follow Asia higher on Friday, as investors awaited central bank decisions from the European Central Bank and the Bank of England next week.
However, sentiment soon soured as results from Broadcom reignited fears about an AI-fuelled bubble, sending stocks lower.
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U.K. economy contracted in October The U.K. economy remained in contraction in October, as data released earlier Friday showed that the country’s gross domestic product fell by 0.1%, matching the drop seen during the prior month and below the 0.1% growth expected.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. The uncertainty surrounding the Autumn budget, delivered by U.K. finance minister Rachel Reeves in November, likely deterred businesses and consumers alike from making investment decisions.
The BoE holds its final policy-setting meeting of the year next week, and is widely expected to cut interest rates by a quarter point to 3.75% as recent data has shown inflation drifting lower.
German inflation rose to 2.6% in November, the federal statistics office said on Friday, confirming preliminary data, while consumer prices harmonised to compare with other European Union countries, stood at 2.3% year-on-year in October.
The ECB, by contrast, is expected to keep interest rates unchanged next week, with eurozone inflation roughly in line with the central bank’s 2% medium-term target.
Broadcom weighed by lower margins In the corporate sector, Capita’s (LON:CPI) trading update reported that while the revenue performance in some divisions fell short of expectations, the outsourcing company’s full-year profit guidance remained unchanged.
Broadcom (NASDAQ:AVGO) is in the spotlight after the U.S. semiconductor manufacturer projected first-quarter revenue above Wall Street estimates, but said margins would fall due to a higher mix of artificial intelligence revenue.
Broadcom has jumped into the AI chip business, which has investors nervous about the profitability and costs of enormous investments.
Crude edges higher Oil prices rose on Friday as the prospect of the U.S. intercepting more Venezuelan oil tankers deepened supply concerns.
Brent futures climbed 0.1% to $61.33 a barrel, and U.S. West Texas Intermediate crude futures rose 0.2% to $57.71 a barrel.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. However, both benchmarks were on course for weekly declines, after dropping around 1.5% on Thursday, as a possible peace agreement between Russia and Ukraine would likely increase the supply of Russian oil into the global market.
