European Markets Tumble: Anxiety Grows Amidst AI and Economic Uncertainty

European shares, particularly in Germany, hit a five-month low due to fears over overvalued tech sectors and the lack of an imminent U.S. interest rate cut. The STOXX 600 fell 1.8%, marking its worst day since August. Investor sentiment is fragile with expectations for Nvidia's performance.

On Tuesday, European shares, notably those in Germany, plummeted to a five-month low. This decline was driven by a widespread risk-off sentiment in global markets, largely due to concerns about an overvalued technology sector and diminishing hopes for a timely interest rate reduction by the U.S. Federal Reserve.

The pan-European STOXX 600 index dropped 1.8%, closing at 561.62 points, and experienced its most significant decline since August. Major regional indices such as Germany's DAX and France's CAC 40 also saw significant losses, falling by 1.8% and 1.9% respectively. As investor unease grew, a volatility gauge increased by 2.7 points to 22.89, the highest since the U.S. regional bank sell-off in mid-October.

According to Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, this volatility reflects market anxiety over AI valuations, Federal Reserve actions, and uncertainty in U.S. economic data and long-term borrowing costs. Losses were widespread, with European banking, auto, and mining stocks among the hardest hit, while cautious traders await upcoming U.S. jobs data and Fed policy announcements.

(With inputs from agencies.)