European Midday Briefing : Stocks Fall as AI Valuation Concerns Grow

MARKET WRAPS

European shares were on track to end the week lower as the big tech stocks selloff continued and volatility increased following weaker-than-expected labor data.

Concerns over valuations and persistent uncertainty surrounding tariffs and U.S. monetary policy is weighing on investor sentiment.

Morgan Stanley said the recent pullback in AI stocks has highlighted "the narrow nature of the market rally."

The lack of reliable data amid the U.S. government shutdown is also increasing investor worries.

"The data vacuum means clarity is tough to find , as illustrated by contrasting survey data from Wednesday and Thursday," ING said.

Economic insight

Chinese exports unexpectedly fell in October following months of back-and-forth U.S. tariffs on Chinese imports.

This suggests China might not have easily diversified its exports away from the U.S., or demand outside the U.S. isn't enough to offset losses from the U.S. market, ING said.

"That will only add to fears of increasing Chinese pressure in European markets."

U.S. Markets:

Stock futures were edging up early on Friday, as investors are closely watching any move toward ending the record-long government shutdown while they dig into more earnings.

Meanwhile, transportation officials said they plan to cut flight traffic at 40 airports by up to 10% starting Friday, as a safety measure prompted by the shutdown.

Forex:

The euro fell. China's soft trade data Friday were unwelcome news for the currency, ING said.

The euro might have established an important low of $1.1470 this week, but there needs to be more clarity on the slowing U.S. jobs market for a decent rally to unfold, it added.

The dollar recovered slightly from losses in the previous session triggered by weak U.S. labor market data.

Sterling fell. The currency could extend its weakness against the euro if upcoming data and the November 26 budget pave the way for further U.K. interest-rate cuts in December, MUFG said.

Bonds:

Eurozone government bond yields mostly rose, tracking Treasury yields, with some focus on Belgian government bonds amid dragging budget talks.

Treasury yields rose, paring some of Thursday's decline, with the 10-year Treasury yield remaining above the 4% level.

The Treasury's funding strategy was expected to turn increasingly opportunistic and dynamic, taking market structure into account, Julius Baer said.

SEB said the 10-year Treasury yield was expected to decline to 3.80%-3.90% in the coming three to six months, if expectations of sizeable interest-rate cuts by the Fed prevailed.

Societe Generale was inclined to see moderately higher Bund yields in 2026 , but a rise above 3% in the 10-year Bund yield requires some preconditions.

The German fiscal expansion and the resulting higher debt issuance will continue to be the major theme for intra-eurozone government bond yield spreads in 2026, SEB said.

Energy:

Oil prices rose but were on track for a weekly loss of more than 1%, pressured by concerns over excess supply and signs of weaker crude demand in the U.S.

"Geopolitical disruptions, such as Ukrainian attacks on Russian refineries and renewed U.S. sanctions on Rosneft and Lukoil, have added modest upside risks ," MUFG said.

Metals:

Gold prices rose in early trading after the latest U.S. data showed a surge in October layoffs , boosting expectations for a Fed interest-rate cut in December.

Copper

Copper edged higher. Demand for copper was expected to surge on the rapid buildout of global data centers, ANZ said.

Iron

Iron ore fell. Prices remained under pressure, as high global shipments and accumulating port inventories , paired with falling steel mill profits, were weighing on iron ore demand, Nanhua Futures said.

EMEA HEADLINES

Trump Administration Blocks Gunvor Takeover of Russian Oil Assets

Gunvor pulled its offer to buy the international assets of sanctioned Russian oil producer Lukoil after the U.S. Treasury Department said it opposed the deal and called the Swiss commodities trader the "Kremlin's puppet."

The move signals the Trump administration is taking a hard-line approach in its recently launched effort to use economic pressure on Moscow to end the war in Ukraine.

German Exports Climbed in September on U.S. Trade Deal

German exports rose in September, helped by a bump in trade with the U.S. after the European Union agreed to a deal on tariffs in the summer.

Exports of goods rose 1.4% on month, German statistics agency Destatis said Friday, higher than the 0.5% expected by economists polled by The Wall Street Journal.

IAG Posts Drop in Net Profit, Flat Revenue After Flying Fewer Passengers

British Airways owner International Consolidated Airlines Group posted a drop in net profit and flat revenue after fewer passengers chose its airlines to fly in the third quarter.

IAG, which also encompasses Iberia and Vueling among other airlines, said Friday that it made 1.40 billion euros ($1.62 billion) in net profit in its third quarter compared with 1.435 billion euros a year earlier, on revenue that stood flat at 9.33 billion euros.

Italy's Monte dei Paschi Posts Profit Rise Ahead of Mediobanca Integration

Banca Monte dei Paschi di Siena reported a rise in net profit for the third quarter as it prepares to integrate peer Mediobanca after the closure of its successful takeover bid.

The Italian lender, which is considered the world's oldest bank still in operation, made 474.0 million euros ($547.4 million) in net profit for the three-month period compared with 406.7 million euros the previous year.

GLOBAL NEWS

Fed's Williams Expects Central Bank to Return to Asset Purchases Soon

New York Fed President John Williams said that the Federal Reserve could soon return to expanding its securities holdings, a week after the central bank said that it would wind down efforts to shrink its balance sheet on Dec. 1.

The net bond purchases would be the next, long-planned phase of the Fed's approach to matching the levels of cash-like assets available to banks to their needs-not a new effort to stimulate the economy.

Trump's Power Looks to Be Slipping. What Could Come Next.

Tuesday's election results prompted a rare admission from President Donald Trump: Something had gone poorly for him.

"The shutdown was a big factor, negative for the Republicans," he told his party's senators in a dissection of Tuesday's Democratic sweep of votes in New York City, New Jersey, Virginia, and California.

China's Exports Unexpectedly Contract

SHANGHAI-China's exports fell in October, with shipments to the U.S. dropping for a seventh straight month, as the growth that has powered the world's second-largest economy this year took an unexpected stumble.

Outbound shipments from China declined 1.1% from a year earlier in October in dollar-denominated terms, compared with an 8.3% increase in September, according to data released Friday by China's customs bureau. Exports to the U.S. fell 25% in October from a year earlier.

New Aircraft Carrier Advances China's Naval Power

SINGAPORE-China has put its largest and most sophisticated aircraft carrier into active service, boosting Beijing's quest to create a formidable oceangoing navy that can challenge U.S. power in the Asia-Pacific region and beyond.

Leader Xi Jinping presided over the commissioning ceremony this week for the Fujian, the country's third aircraft carrier and the first to be fully designed and built in China.

Senate Considers Revised Plan to End Government Shutdown

WASHINGTON-Senate Majority Leader John Thune (R., S.D.) told Senate Republicans Thursday that they should expect to vote on a new proposal Friday aiming to end the government shutdown, according to people familiar with the plan, in an attempt by GOP leaders to build momentum toward a deal.

Democrats, however, indicated they weren't sold on the emerging package, with some saying they would need their core demand of extending Affordable Care Act subsidies to be part of any legislation.

Flight-Cancellation Plans Prompt Scramble Across Travel Industry

Airlines and travelers scrambled to review flight plans after U.S. transportation officials said they would throttle commercial air traffic starting Friday, a move that has heightened pressure on lawmakers and the president to end the government shutdown.

Transportation Secretary Sean Duffy said traffic at 40 major airports would be reduced as much as 10% as a safety measure prompted by the shutdown. He has said that while the country's air-travel system is safe, the reduction is aimed at keeping it that way.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

11-07-25 0522ET