AI Trade Reversal Pressures European Stocks

European stocks closed slightly higher on Friday as markets continued to assess how economic activity will fare in a period of higher interest rates. The Euro STOXX 50 gained 0.2% to 6,396 and the STOXX 600 added 0.2% to 650. ASML gained more than 3% after a volatile week, tracking AI infrastructure stocks in the United States following promising signals from OpenAI's latest GPT model. Nokia jumped 3.1% and Nvidia gained 2.6%. Meanwhile, Volkswagen rose 6.6% after it approved another round of job cuts to reign in spending and adapt to a period of lower auto demand in Germany. On the other hand, banks were mixed on a volatile day for global bonds. Bets for a Fed hike were supported by a strong US jobs report, although most sovereign yields in the Eurozone were down on the long end. BNP Paribas and ING closed in the green, while UniCredit and Santander dropped. The Euro STOXX 50 lost 1.4% and the STOXX Europe 600 fell 0.8% on the week.

European stocks attempted to rebound on Friday following choppy morning trading, with the STOXX 50 edging higher while the STOXX 600 hovered around the flatline. Investors continued to assess the monetary policy outlook, with the ECB widely expected to raise borrowing costs by 25bps next week. Meanwhile, a stronger-than-expected US jobs report prompted investors to increase bets on a Fed rate hike, although the outcome of the September meeting remains a wild card. Technology stocks were among the top performers, led by ASML, which gained 1.5%, and Infineon, which rose 2.2%. Volkswagen jumped more than 8% to lead gains on the STOXX 600 after reaching a major turnaround agreement that helped avert an escalation with unions and shareholder Lower Saxony. On the other hand, Dassault Systemes (-4.4%), Vivendi (-5.3%) and Eni (-3.2%) were among the worst performers. For the week, the STOXX 50 fell 1.6%, while the STOXX 600 declined 0.9%.

European stocks were little changed on Friday, with both the STOXX 50 and STOXX 600 hovering around the flatline after posting modest gains in the previous session. Investors continued to assess the monetary policy outlook, with the ECB widely expected to raise borrowing costs by 25 basis points next week, while ongoing tensions in the Middle East continued to weigh on sentiment. Meanwhile, traders awaited the US jobs report due later in the day for further clues on the Fed’s next policy moves. Automakers were among the top performers, led by Volkswagen, which surged 5.3% after reaching a major turnaround agreement that helped avert an escalation with unions and shareholder Lower Saxony. Technology stocks also advanced, with ASML Holding rising 1% and Infineon gaining 1.3%. In contrast, chemical and financial stocks were among the biggest laggards, with UniCredit falling 1.5%. For the week, the STOXX 50 was down 1.6%, while the STOXX 600 declined 0.9%.