European stocks drop sharply on continued tech valuation concerns

Investing.com - European stocks fell sharply on Tuesday, tracking overnight declines on Wall Street on renewed concerns over elevated tech valuations ahead of earnings from AI-darling Nvidia.

The DAX index in Germany dropped 1.8%, the CAC 40 in France tumbled 2.1% and the FTSE 100 in the U.K. declined 1.5%. 

Doubts over AI-inspired valuations  

Global sentiment surrounding the artificial intelligence (AI) trade has continued to sour amid growing concerns about valuations, prompting investors to dump large technology shares ahead of Wednesday’s quarterly earnings from Nvidia (NASDAQ:NVDA).

The blue chip Dow Jones Industrial Average dropped over 500 points, or 1.2%, on Monday, while both the broad-based S&P 500 and the tech-heavy NASDAQ Composite also fell.

Every company would be affected if the AI bubble were to burst, according to Sundar Pichai, the head of Google’s parent firm Alphabet, in an interview with the BBC.

The growth of artificial intelligence (AI) investment had been an "extraordinary moment", but there was some "irrationality" in the current AI boom, said Pichai.

These concerns have emerged ahead of the release of quarterly earnings from tech giant Nvidia, due later this week. The company is at the heart of a massive AI-fueled valuation surge over the past three years, with questions over this ascent having emerged in recent months. 

U.S. data starts to emerge  

There’s little in the way of European economic data due for release Tuesday, so most of the focus will be on the U.S. as the reopening of the federal government enables key data to emerge once more.

U.S. factory orders for August were released, but the main focus is on Thursday’s nonfarm payrolls data for September, for more insight into the health of the labor market, which is a key consideration for the Federal Reserve. 

Federal Reserve Governor Christopher Waller pointed to risks to the job market on Monday, as he urged policymakers to approve another quarter-point rate cut at the upcoming policy meeting on December 9-10.

These comments come amid waning bets that the Fed will cut interest rates in December. Markets are pricing in roughly a 40% chance for a 25 basis point cut during the Fed’s Dec 10-11 meeting, down from 55% last week, CME Fedwatch showed. 

Imperial Brands reported jump in operating profit

Back in Europe, tobacco giant Imperial Brands (LON:IMB) reported a nearly 5% rise in annual adjusted operating profit, supported by higher prices of its tobacco products and growing demand for smoking alternatives.

U.K. homebuilder Crest Nicholson (LON:CRST) expects its annual profit to come in at the low end of, or marginally below, its previous guidance range, citing a subdued housing market through the summer and uncertainty around government tax policy ahead of the upcoming Budget.

Elsewhere, Dulux paint maker Akzo Nobel (AS:AKZO) said it plans to merge with paintmaker Axalta Coating Systems (NYSE:AXTA) in a deal that will create a combined company with an enterprise value of $25 billion.

Crude edges lower as Russian port resumes activity

Oil prices fell slightly lower as supply worries eased following the resumption of activity at Russia’s key export hub following a Ukrainian drone and missile strike. 

Brent futures dropped 0.2% to $64.03 a barrel, and U.S. West Texas Intermediate crude futures was flat at $59.88 a barrel.

Russia’s Novorossiysk port resumed oil loadings on Sunday following a two-day suspension triggered by the attack.

Exports from Novorossiysk and a nearby Caspian Pipeline Consortium terminal, together represent about 2.2 million barrels per day, or roughly 2% of global supply.