Europe close: Stocks broadly weaker amid fresh bubble fears
By Josh White
Date: Friday 21 Nov 2025
(Sharecast News) - European equities were broadly lower on Friday, as concerns over stretched artificial intelligence valuations and sharp declines in semiconductor stocks dragged markets lower, while defence shares came under pressure following reports of a potential Ukraine peace plan.
Dan Coatsworth, head of markets at AJ Bell, said "relief around Nvidia's results didn't last long as investors couldn't shake their fears that the AI boom might have got ahead of itself," adding that there was "a lingering concern that the AI revolution might take longer than expected to truly transform the way companies do business."
The pan-European Stoxx 600 slipped 0.36%, extending a volatile week for the region.
Patrick Munnelly at TickMill noted that "global markets are bracing for their roughest week in seven months as investors retreat from riskier assets amid concerns over lofty valuations and uncertainty surrounding the payoff of massive AI investments," with the MSCI All Country World Index heading for its steepest weekly loss since April.
Germany's DAX dropped 0.78% to 23,096.49, while France's CAC 40 was broadly flat, up 0.02% at 7,982.65.
London's FTSE 100 edged 0.13% higher to 9,539.71.
Coatsworth said "there is a clear shift in risk appetite evident today, with tech stocks weaker and defensive-style companies such as utilities and consumer healthcare product providers in vogue as people seek to hide in traditionally safer parts of the market."
The mood was influenced by losses on Wall Street, where Nvidia slumped overnight after a dramatic intraday reversal as traders abandoned expectations of a Federal Reserve rate cut in December.
Munnelly said "uncertainty over the Federal Reserve's next move on interest rates continues to linger, with policymakers warning against easing monetary policy too hastily."
Coatsworth added that "investors are struggling to predict what the Federal Reserve will do next with interest rates," noting that markets now price a 67% chance of no change in December compared with a 98% chance of a cut a month ago.
That shift followed long-delayed US labour market data showing September job growth accelerated but the unemployment rate rose to 4.4%, with earlier months revised down, reinforcing concerns about a softening economic backdrop.
Munnelly said the delayed report showed "the US economy adding 119,000 jobs, with gains more widespread across industries," although the rise in unemployment "signalling increased labour market slack due to higher participation."
Fresh data shows moderation in eurozone private sector growth
Eurozone economic data pointed to a slight moderation in private-sector growth.
The flash composite PMI slipped to 52.4 in November from 52.5 in October, in line with forecasts.
Services activity rose to an 18-month high of 53.1, driven by firmer new orders and a notable improvement in France.
Manufacturing, however, weakened, with the PMI falling to a five-month low of 49.7.
Cyrus de la Rubia, chief economist at HCOB, said factories remained "marooned in a no-man's land of directionlessness" and were potentially "several months, and possibly even several quarters" away from a sustained recovery.
He added that although cost pressures had intensified, slowing sales price inflation meant "there is no reason to tighten monetary policy," and he expects the ECB to leave rates unchanged in December.
In the UK, private-sector growth stalled as firms delayed decisions ahead of next week's Budget.
The composite PMI slipped to 50.5 from 52.2, missing expectations, with services slowing and manufacturing only marginally back in expansion.
Chris Williamson, chief business economist at S&P Global, warned that "economic growth has stalled, job losses have accelerated, and business confidence has deteriorated," noting the data were consistent with zero GDP growth in November.
PwC's Jake Finney said the economy was "running low on steam" and that Budget uncertainty had prompted households and businesses to adopt a "wait-and-see approach."
British consumer confidence meanwhile fell to -19 in the latest GfK survey, with all components weakening ahead of the Budget.
Retail sales unexpectedly dropped 1.1% in October as shoppers held off spending until Black Friday promotions, while government borrowing reached £17.4bn - well above forecasts - placing Chancellor Rachel Reeves under further pressure.
US data highlighted contrasting trends - factory activity slowed to a four-month low, with the manufacturing PMI falling to 51.9 and a record build-up in inventories signalling potential output risks, while services activity strengthened, lifting the composite PMI to 54.8.
Improved business confidence was supported by expectations of further rate cuts and the resolution of the 43-day government shutdown.
Dutch chip stocks, defence plays in the red
In equities, semiconductor makers led the decline, with ASML down 6.27%, BE Semiconductor off 5.57% and ASM International falling 4.58% amid renewed pressure on the AI trade.
Coatsworth said that when "markets remain on a knife edge, it's inevitable that some people will want to protect any profits by trimming positions," adding that this "selling behaviour is likely to be what's dragging down markets."
He also noted that Bitcoin, "which sits at the top end of the risk spectrum, extended a losing streak," pointing to waning confidence in speculative assets.
Defence stocks slumped after reports that the US and Russia had drawn up a potential peace plan for Ukraine requiring Kyiv to cede the Donbas region and scale back its military forces.
Shares in Renk, Rheinmetall, Hensoldt and Leonardo fell sharply.
Munnelly added that the geopolitical backdrop was also weighing on commodities, with Brent crude expected to slide more than 2% this week as Ukraine-related developments and US sanctions on Russian oil companies fed into prices.
On the upside, German ticketing firm Eventim jumped 11.75% following a strong earnings report.
Coatsworth said the UK's FTSE 100 had fared relatively better "thanks to its plethora of defensive-style businesses," noting that Unilever was in demand as it sells products people buy regardless of wider uncertainty, while Haleon also gained as investors sought relief from a "chaotic session."
Reporting by Josh White for Sharecast.com.
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