US falls knock Europe as Artificial Intelligence slowdown fears mount

Stocks in Europe declined sharply on Friday after heavy falls on Wall Street overnight, while a strong US jobs report lit up the dollar.

The FTSE 100 index closed down 108.72 points, 1.0%, at 10,673.94. It had earlier traded as low as 10,528.07.

The FTSE 250 ended 197.66 points lower, 0.8%, at 24,504.32, and the AIM all-share shed 3.36 points, 0.4%, at 753.73.

For the week, the FTSE 100 fell 0.5%, the FTSE 250 rose 0.2% and the AIM all-share added 0.2%.

In Europe, the CAC 40 in Paris fell 0.8%, while the DAX 40 in Frankfurt declined 1.9%.

In early trading on Friday, US markets recouped some of Thursday’s hefty falls. Around the time of the London equities close on Friday, the Dow Jones Industrial Average was up 0.1%, the S&P 500 was 1.0% higher and the Nasdaq Composite climbed 1.8%.

On Thursday, the Dow shed 3.4%, the S&P gave back 4.4%, and the Nasdaq slumped 5.5%.

It was the worst drop in the Nasdaq since the tariff fuelled falls in April 2025, and took the tech-laden index into “correction” territory – more than 10% below its recent record high.

Concerns about the outlook for technology stocks in the wake of the midterm wins for the Democrats sparked the falls with some of the biggest US names firmly in the red.

“Mid​​terms usually act as a clearing event for markets, but this time they have been more of a trigger for brutal rotation,” commented Barclays Capital analyst Emmanuel Cau.

Mr Cau thinks the “indiscriminate” selling looks overdone versus likely policy outcomes, but said it may take time for the dust to settle.

“We may not be through the full extent of systematic selling yet, but after the recent sell-off, we should be approaching closer to levels where risks-reward starts to get better,” he added.

UBS explained that the midterms have potential implications for the speed and location of the data centre build-out, and with it the timeline for monetising investment commitments.

It pointed out 415 local moratoriums on data centre construction are currently active.

“The build-out is becoming less popular, and many newly elected officials campaigned against data centres. Proposals to ensure that data centre energy demand does not impact consumer prices could garner bipartisan support,” UBS suggests.

Dan Coatsworth, head of markets at AJ Bell, noted the “AI story has all been about speed, and now there is a danger of it moving to a lower gear, and some of the wheels falling off”.

Bank of America also called the sell-off in chip stocks “indiscriminate”, but thinks Congressional policy clarity and buybacks could help restore confidence.

Amid the tech wobble, figures showed the US labour market remains resilient, increasing the likelihood of a December rate increase by the Federal Reserve.

Figures from the Bureau of Labour Statistics showed nonfarm payroll employment increased by 165,000 in October, picking up pace from a revised 60,000 rise in September.

The reading comfortably beat FXStreet consensus which predicted a lesser increase of 65,000.

Nonfarm payrolls for August were revised up by 53,000, from 133,000 to 186,000, and the change for September was revised up by 31,000, from 29,000 to 60,000.

The unemployment rate fell to 4.1% from 4.2% in September where FXStreet consensus had expected it to stay.

Thomas Feltmate, senior economist at TD Economics, said the report suggests the labour market is on a slightly stronger footing than previously thought, giving the Federal Reserve little reason to remain on the sidelines.

Treasury yields rose by several basis points following the release, with Fed futures 75% priced for a December hike, he noted.

Citigroup analyst Andrew Hollenhorst felt the report reinforced that the labour market is both stable and not a source of inflationary pressure.

His base case remains for a 25 basis points rate hike in December – “but we would not be surprised if the Fed holds rates steady should the tech sell-off continue.”

The next US jobs report is scheduled for December 4, ahead of the December Federal Open Market Committee meeting which takes place on December 9 to December 10. Ahead of that US inflation data will be released next week.

The pound was quoted at 1.3362 dollars late on Friday afternoon, down from 1.3473 dollars at the same time on Thursday. Against the euro, sterling ebbed to 1.1989 euros from 1.2001 euros.

The euro was lower at 1.1149 dollars from 1.1228 dollars late on Thursday. Against the yen, the dollar was higher at 158.34 yen from 157.84 yen.

The yield on the US 10-year Treasury was quoted at 4.87% late on Friday afternoon, stretched from 4.84% on Thursday. The yield on the US 30-year Treasury was at 5.26%, widened from 5.25%.

In London, British Airways owner International Consolidated Airlines rose 1.5% as it said it was on track to deliver full-year market expectations, despite a third-quarter profit miss, as it highlighted a positive demand outlook.

Madrid-based IAG said operating profit fell 16% to 1.73 billion euros (£1.44 billion) in the three months ended September 30 from 2.05 billion euros (£1.71 billion) a year earlier, below the company’s compiled consensus of 1.81 billion euros (£1.15 billion).

More positively, the FTSE 100 listing said it continues to expect good revenue growth, with 85% of expected forward bookings for the fourth quarter now secured. Bookings for the first quarter of 2027 are currently “strong”, it added.

Fallers were broad-based with telecommunications firm BT down 6.4% on further reflection of Thursday’s results, accountancy software firm Sage was down 3.2% and retailer Next was 3.2% lower.

On the FTSE 250, Man Group slumped 7.7% after London’s High Court found two of its subsidiaries liable in a corruption case involving Kuwait’s state pension fund.

In a statement late on Thursday, Man Group said the judgment indicates that the Kuwaiti Public Institution for Social Security is entitled to recover around 155 million dollars (£116 million) from it.

The ruling follows a year-long civil trial into allegations that Fahad al Rajaan, the former director general of PIFSS, received illicit payments from financial institutions seeking investment mandates. The trial commenced in March 2025 and concluded in March this year.

The court found that two former Man Group employees were aware that an intermediary was paying bribes to Mr al Rajaan, making two of the firm’s subsidiaries liable alongside other defendants.

Betting operator Entain fell 3.9% in a read across from weak results from US operator Draftkings.

Entain, which owns Ladbrokes and Coral in the UK, also has a 50% stake in BetMGM in the US.

After Thursday’s US market close, Draftkings reported a third quarter adjusted earnings before interest, tax, depreciation and amortisation loss of 317 million dollars (£237 million) which Citigroup said was worse than 60 million dollars (£45 million) consensus.

Total revenue of 1.33 billion dollars (£990 million) was below 1.39 billion dollars (£1.04 billion) consensus.

Brent oil was trading at 97.66 dollars a barrel on Friday, higher than the 97.34 dollars late on Thursday.

Gold was quoted at 4,058.03 dollars an ounce on Friday, lower than the 4,116.08 dollars on Thursday.

The biggest risers on the FTSE 100 were: Coca-Cola HBC, up 136.0p at 4,188.0p; Scottish Mortgage Investment Trust, up 36.0p at 1,470.0p; Endeavour Mining, up 81.0p at 4,094.0p; Rolls-Royce, up 21.6p at 1,261.2p; and International Airlines Group, up 6.5p at 433.7p.

The biggest fallers on the FTSE 100 were: BT Group, down 14.8p at 217.0p; Airtel Africa, down 11.6p at 277.6p; Hiscox, down 67.0p at 1,913.0p; Sage Group, down 38.5p at 1,165.0p; and British American Tobacco, down 150.0p at 4,567.0p.

Monday’s global economic events calendar has consumer and wholesale price inflation figures in China, trade data in Germany and wholesale inventories numbers in the US.

Monday’s local corporate calendar has a trading statement from building materials supplier Kingspan and half-results from IT support provider Kainos.

Contributed by Alliance News