European stocks saw a decline on Tuesday, influenced by a significant 7% drop in chipmaker Nvidia that impacted U.S. tech companies on Monday, reflecting market nervousness about the ongoing artificial intelligence boom.
Market Movements:
- STOXX 600 Index: Fell by 0.3% in early trading.
- STOXX Tech Index: Dropped by 1.5%.
- Germany’s DAX Index: Decreased by 1.2%.
- Britain’s FTSE 100: Remained flat.
- U.S. Markets: Nasdaq 100 down 1.1%, S&P 500 down 0.5%, but Dow Jones rose 0.7% as investors shifted to value sectors like energy and utilities.
- Airbus Impact: A weak earnings update from Airbus also contributed to the decline in European shares.
Investor Focus:
- Nvidia’s Performance: Nvidia shares have seen a 13% selloff over the last three days, despite a previous surge that briefly made it the world’s largest company.
- Market Sentiment: Derren Nathan from Hargreaves Lansdown noted that Nvidia shares have still gained 190% over the past 12 months, and the rotation into other sectors signifies investor confidence in the broader economy.
- Record Highs: Despite recent dips, equity indices in the U.S. and Europe remain near record highs due to optimism over AI and potential interest rate cuts.
Global Market Activity:
- U.S. Futures: Remained little changed on Tuesday morning in Europe.
- Japan’s Nikkei 225: Climbed 0.95% overnight.
- China’s CSI 300: Fell 0.54%.
Bond and Currency Markets:
- Bond Yields: The yield on the 10-year U.S. Treasury fell 1 bp to 4.24%, influenced by comments from San Francisco Fed President Mary Daly about the need for caution amid rising unemployment and inflation risks.
- Yen Pressure: The yen remained under pressure, trading around a two-month low of 160 to the dollar, with traders wary of potential intervention from Japanese authorities.
- Dollar Index: Flat at 105.47, slightly down from a two-month high on Friday.
Upcoming Events:
- Snap Elections in France: Starting this weekend.
- U.S. Presidential Debate: Scheduled for Thursday.
- Federal Reserve’s PCE Inflation Report: Expected on Friday, with forecasts predicting a slight decrease to 2.6% year-on-year in May from 2.7% in April.
Oil Prices:
- Brent Futures: Held at $86.06 a barrel after rising to $86.23 overnight, marking the highest level since early May.