Europe close: Stocks turn weaker on AI concerns
By Josh White
Date: Friday 12 Dec 2025
(Sharecast News) - European equities slipped into the red to close lower on Friday, surrendering earlier gains that followed a record-setting session on Wall Street overnight.
The pan-European Stoxx 600 fell 0.52% to 578.24, with losses seen across the region.
Germany's DAX declined 0.45% to 24,186.49, France's CAC 40 eased 0.21% to 8,068.62 and London's FTSE 100 dropped 0.56% to 9,649.03.
Patrick Munnelly, market strategy partner at TickMill, noted that "the main UK stock indexes initially rose on Friday before softening towards the close as US market sentiment deteriorated," as renewed concerns over AI valuations weighed on risk appetite.
US stocks finished mixed on Thursday, though the Dow Jones Industrial Average surged to a fresh all-time high, supported by strong gains in heavyweight financial stocks including Goldman Sachs, American Express and Visa.
The late pullback in equities came as volatility returned to US technology shares.
Munnelly said a "surge in risk appetite reversed amid renewed concerns over AI valuations, which dented the Nasdaq by over 1%," adding that Oracle's earnings had reignited worries about whether heavy investment in artificial intelligence infrastructure would deliver sufficient returns.
Dan Coatsworth, head of markets at AJ Bell, said "the US tech sell-off was short-lived as Wall Street narrowed losses towards the end of yesterday's session," helping to stabilise broader sentiment despite lingering caution around high-growth names.
German inflation holds steady, UK economy unexpectedly shrinks
Economic data provided a mixed backdrop.
In Germany, inflation held steady in November, with the consumer price index rising 2.3% year on year, unchanged from October and slightly below September's 2.4%, according to final figures from Destatis.
Services inflation remained elevated at 3.5%, driven by passenger transport, social facilities and package holidays, while food inflation slowed to a 10-month low of 1.2%.
Energy prices fell 0.1% from a year earlier, easing from a 0.9% decline in October, and core inflation edged down to 2.7% from 2.8%.
Destatis president Ruth Brand said consumer price developments had "stabilised for now" as the year-end approaches.
In the UK, the economy unexpectedly contracted in October, with GDP shrinking 0.1% after a 0.1% decline in September and flat growth in August, undershooting expectations for a modest expansion.
The Office for National Statistics reported a 0.3% fall in services output and a 0.6% drop in construction, partly offset by a 1.1% rise in production.
ONS director Liz McKeown said the latest figures pointed to continued weakness in car manufacturing and stalling services growth.
Coatsworth said the data reflected "a country going into a freeze, fearing that the chancellor would hike taxes and leave less money in people's pockets," adding that "there is a real chance that November's GDP figure will be equally as gloomy."
Munnelly said the contraction "signall[ed] a loss of momentum ahead of finance minister Rachel Reeves' budget announcement" and had fuelled expectations of a Bank of England rate cut next week, with markets pricing in a 90% probability of a 25-basis-point reduction.
Berenberg economist Andrew Wishart said the UK economy had "faltered more dramatically than we expected," extending the cumulative decline in output since June to 0.4%, and suggested the slowdown would allow the Bank of England to cut rates from 4% to 3% by next July, with the first reduction likely on 18 December.
Munnelly added that the latest data cast doubt on the Bank of England's forecasts for moderate fourth-quarter growth, noting that "the likelihood of achieving the Bank of England's November Monetary Policy Report projection of 0.3% quarterly growth for the fourth quarter now seems slim."
The Confederation of British Industry struck a cautious tone despite upgrading its UK growth forecasts following higher government spending set out in the Autumn Budget.
It said it now expected GDP growth of 1.4% in 2025 and 1.3% in 2026, up from earlier projections of 1.2% and 1%, but warned that weak private-sector demand, elevated labour and energy costs and global uncertainty continue to weigh on activity.
Chief economist Louise Hellem said the outlook reflected "cautious optimism" rather than a sustained recovery, while the CBI expected the Bank of England to cut rates twice over the next year, taking Bank Rate to 3.5%.
LPP surges, Magnum and Dutch chip names in the red
In equities, Polish retailer LPP surged 15.3% after setting new financial targets underpinned by growth in its Sinsay budget brand.
France's Wendel rose 4.85% on reports it plans to return €1.6bn to investors by 2030.
On the downside, Magnum Ice Cream Company fell 1.51% in its first week of trading after being spun out of Unilever, which itself slipped 0.37%.
Dutch semiconductor names also came under pressure, with ASM International down 4.9% and BE Semiconductor Industries losing 3.51%, tracking a broader AI-led technology sell-off in the US that saw Oracle and Nvidia close lower on Thursday.
Munnelly said concerns over AI spending had led "some investors to shift towards other sectors while the outlook for the US economy remains robust."
Reporting by Josh White for Sharecast.com.
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