AI Trade Shows Signs of Fatigue, European Stocks Outperform US in October
As the artificial intelligence trade shows signs of fatigue and drives capital rotation, European stocks outperformed US stocks in October, with the Stoxx Europe 600 Index up about 2% this month and on track to beat the S&P 500 Index, which has been weighed down by its technology weighting. In Friday's global stock selloff, the Nasdaq 100 Index fell sharply, South Korea's Kospi Index dropped 3.5%, and a UBS basket of European AI beneficiaries fell 4.9%.
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European stocks edged lower on the last trading day of October, but with the AI trade showing signs of fatigue and driving a rotation of funds, European stocks have recently outperformed US stocks.
The Stoxx Europe 600 index closed down 0.4%, narrowing this month's gain to about 2%. Tech and mining stocks lagged, while health care and food and beverage stocks led gains.
On Friday, as global stocks were hit by a selloff, European stocks once again proved relatively resilient. Disappointing results from Amazon and Intel rekindled market concerns about massive AI spending, and the Nasdaq 100 index fell sharply. Asian stocks also declined, with South Korea's Kospi index, seen as a barometer of AI trade sentiment, dropping 3.5% as investors reassessed the outlook for tech stocks. A UBS basket of European AI beneficiaries fell 4.9%.
The Stoxx Europe 600 index is set to outperform the S&P 500 in October, with the latter weighed down by its higher weighting in tech stocks. Throughout October, investors rotated into more defensive sectors in the European market, while trades that performed strongly earlier this year, such as banks and basic resources, fell behind.
"European equities are relatively less exposed to the current tech sector troubles, so they may provide some support for European assets in the near term," said Jai Malhi, senior equity strategist at Vanda Research. "However, investors should remember that Europe also faces its own problems. We believe investor positioning has not yet fully reflected the deeper macro risks facing the region."
At the stock level, market focus remained partly on corporate earnings. AstraZeneca rose 7.0% as the pharmaceutical company's results beat expectations, driven mainly by its fast-growing oncology business. Sanofi rose 4.7%. The French drugmaker raised its full-year sales and profit forecasts due to rising demand for its blockbuster skin and asthma drug Dupixent. news_keyword_pub,usstock,AMZN&INTC&.IXIC&UBS&AZN&SNY iframe below body iframe below body General statement General statement QR code at end start QR code at end start
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