European Shares Have Their Worst Day Since July as the AI Sell-Off Spreads

European shares had their worst day since July on Friday, and the reason was not the Bank of England. The Stoxx 600 fell about 1.6 per cent in early trade and gave up its gain for the week. It had come close to a record on Thursday. Germany's DAX was down about 1.7 per cent, France's CAC 40 about 1.4 per cent, and London's FTSE 100 about 1.5 per cent. The selling was in semiconductors, software, media, healthcare and retail. Banks and oil, the things that had carried the week, were not the story.

Wall Street set the tone after the close. The Nasdaq fell 5.5 per cent, its worst session in 19 months, and is now more than 10 per cent below the high it set on 6 October. That is a correction on the technicians' measure. The S&P 500 fell about 4.4 per cent. In Asia, the Nikkei fell about 6 per cent, its worst day since the tariff shock of last year. Samsung and SK Hynix dropped by more than 10 per cent. SoftBank fell about 11 per cent. The fear is the same sentence in every market: the money going into artificial intelligence may not earn its keep, and a Democrat-led Congress may be minded to slow the building of data centres.

Europe was supposed to be the sheltered market

The Stoxx 600 has less AI in it than the Nasdaq, which is why it had worn this week better than New York or Seoul. It had absorbed a fall of nearly a fifth in the oil price, the first British rate rise in three years, and a change of control in Congress. Friday tested the idea that a smaller technology weight is the same thing as immunity. ASML and Prosus each fell more than 1 per cent. Capgemini was down about 2 per cent. SAP slipped. Schneider Electric and Siemens Energy, which sell the equipment the data centres need, were only marginally lower, but they were lower. Healthcare was among the weakest groups, down more than 2 per cent, on the view that drug discovery had been priced for an AI boom that investors are now marking down.

London's drop is set out in our market note. The rate rise to 4 per cent was delivered on Thursday and had been expected. It did not cause a 1.5 per cent fall at the open. Oil near 98 dollars would, on another morning, have been read as relief after a war price above 110. Investors traded the technology story instead. For Europe, the practical question is whether this is a one-day spill from New York or the start of a repricing of every firm that had been valued as a pick-and-shovel supplier to the AI build-out. The early evidence is a single session. It is a large one.

Dublin is six days away

The political calendar does not pause for a stock market. European leaders are due in Dublin on Thursday for a summit held under Ireland's presidency. The city is also the centre of a public sector strike, if the pay talks do not produce a text before then. Road closures are planned twice over: once for the motorcades, once for the rallies. A market that has just had its worst day since July will be the backdrop, not the agenda. The agenda is still the one Barnier was arguing about on Thursday, and the one the Irish government would like to hold without a march outside the gates. Friday's prices do not settle either argument. They do tell the arriving delegations that the calm of the past month in European equities has broken.