European stocks fall sharply; tech sector hit hard

Investing.com - European stock markets fell sharply Monday, weighed by sharp losses in the region's tech sector following the popularity of an inexpensive Chinese artificial intelligence company.

At 06:35 ET (11:35 GMT), the DAX index in Germany dropped 1.1%, the CAC 40 in France slipped 0.9% and the FTSE 100 in the UK fell 0.2%.

Chip stocks slump

European chip stocks tumbled on Monday as investors fretted over the implications of the release of a new artificial intelligence model from Chinese firm DeepSeek.

The start-up has launched a free assistant to rival that of OpenAI's ChatGPT, with the group saying that its technology offers similar performance despite using cheaper chips and less data. 

Although some doubts have been cast over DeepSeek's claims, the model has still sparked market worries over a long-standing wager that AI will fuel a chain of demand stretching from semiconductors to data centers.

ASML (AS:ASML), the Dutch computer equipment maker, slumped 10%, while peers ASM International (AS:ASMI) and BE Semiconductor Industries (AS:BESI) dropped more than 11%. Schneider Electric (EPA:SCHN), Munters Group (ST:MTRS) and Siemens (ETR:SIEGn) Energy (ETR:ENR1n) also declined sharply.

The European quarterly earnings season arrives in full force this week, with results due from the likes of Shell (LON:SHEL), LVMH (EPA:LVMH), Deutsche Bank (ETR:DBKGn), Roche (SIX:RO) and ASML (AS:ASML) throughout the week.

Elsewhere, Ryanair (IR:RYA) stock rose 3% after the low-cost airline reported after-tax profit for the three months to the end of December ahead of expectations, even as it trimmed its forecast for passenger numbers for the next year.

BASF (ETR:BASFN) stock slipped slightly as the company's preliminary 2024 figures posted a sharp decline in earnings due to impairments and restructuring costs. 

German business sentiment improves

There was some positive news Monday after German business morale unexpectedly improved in January thanks to a more positive assessment of the current economic situation.

The Ifo institute said its business climate index increased to 85.1 in January from 84.7 in the previous month, while the current conditions index rose to 86.1 in January from 85.1 in December.

The European Central Bank.concludes its latest meeting on Thursday, with officials having the chance to digest the latest growth data from the major European countries, released before the meeting.

Economists widely expect the ECB to slash rates by a quarter of a percentage point at its upcoming policy meeting, after having already slashed borrowing costs four times to address weak growth and cooling inflation in the currency bloc.

The Federal Reserve also meets this week, with the US central bank expected to keep interest rates unchanged at the conclusion of its two-day gathering on Wednesday.

Crude heads lower 

Oil prices fell slightly Monday, with traders nervous following President Trump's call last week for the Organization of Petroleum Exporting Countries to lower crude prices.

By 06:35 ET, the US crude futures (WTI) dropped 0.2% to $74.51 a barrel, while the Brent contract fell 0.2% to $77.38 a barrel.

The crude market was nursing steep losses from last week after Trump declared a national emergency and called for a sharp increase in US energy production, while also calling on the OPEC cartel to bring down crude prices. 

Oil markets were also dented by weak purchasing managers index data from top importer China, which showed local business activity remained under pressure.