European Stocks Set to Slip as Tech Sector Rally Shows Signs of Fatigue
European stocks are poised to decline following a mixed day on Wall Street, with growing speculation that the tech sector rally may be losing steam. Euro Stoxx 50 futures fell, while US contracts inched higher after various US non-tech sectors saw gains on Monday. Nvidia, a key player in the artificial intelligence revolution, continued its three-day decline, shedding about $430 billion and entering correction territory.
In Asia, equities advanced, with Japanese shares leading the region. Investors shifted their focus from the technology sector to value stocks, prompting a rotation in the market. The yen strengthened, while the US dollar dipped against most major currencies. Treasuries remained relatively stable during Asian trading.
Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co., noted that global investors are rebalancing their portfolios as the quarter-end approaches, selling off assets that have performed well recently and buying into underperforming names. This trend is expected to support the broader Topix index, according to Ishiguro.
Market participants will also be closely monitoring political developments in France, as the main parties hold a debate ahead of legislative elections. Spain is set to release its May Producer Price Index, with an ECB speech scheduled later in the day.
Chinese machinery stocks saw gains after President Xi Jinping called for enhanced technological innovation, while Premier Li Qiang addressed economic concerns at the World Economic Forum. Meanwhile, the US is investigating Chinese telecom companies over data security issues.
Deutsche Bank’s Binky Chadha suggested that US equities may pause after the recent tech-led rally. Analysts warn of potential downside risks if market optimism proves unjustified. Despite a bullish outlook for the tech sector, some expect profit-taking in the near future.
In commodities, oil prices held steady amid geopolitical tensions, while gold prices dipped slightly. Copper prices rose as investors considered potential stimulus measures in China. Bitcoin rebounded after a recent decline, reflecting cooling demand for cryptocurrencies.
Key events this week include US consumer confidence data, new home sales, China industrial profits, Eurozone economic indicators, and US GDP figures. Market movements show a mix of gains and losses across various asset classes, with currencies and bond yields remaining relatively stable.
This story was produced with the assistance of Bloomberg Automation, with contributions from Toshiro Hasegawa.
