Investing.com – European equities were under pressure on Monday morning to kick off a high-stakes week dominated by major central bank policy decisions, as a fresh surge in crude oil prices, stalled Middle East peace talks, and unexpected headwinds in the artificial intelligence sector weighed on market sentiment.
The pan-European index slipped 0.5%, lingering around its lowest levels in nearly two months, as investors adopted a defensive stance ahead of interest rate decisions from the Federal Reserve, the Bank of Japan, and the Bank of England.
Germany’s fell 0.6%, while France’s fell nearly 0.8%, while Italy’s and Spain’s dripped 1.6% and 1.4% respectively.
London’s , bucked the trend, gaining 0.5%.
AI pioneers call for safety pause, dragging tech listings lower
While European equity bourses are largely insulated from the direct shockwaves of the global tech trade compared to Wall Street, rate-sensitive growth and technology listings took a hit following warnings from industry leaders.
Shares in AI-linked technology vendors and semiconductor suppliers traded lower across Frankfurt, Paris, and Amsterdam after the leaders of OpenAI and Anthropic jointly called for a temporary slowdown in advanced AI model development.
fell 5.2%, while fell 4.4%. fell 3.4%. and fell 13.7% and 8% respectively.
Brent jumps 3% as Hormuz talks postponed and Gulf infrastructure attacked
futures jumped another 3% on the day to trade near $112 a barrel, extending a multi-week rally that has seen oil prices advance nearly 40% since early July.
Fresh military strikes hit Saudi Arabian infrastructure – including an attack on a major Saudi oil pipeline – while an advance by Yemen’s Houthi rebels near Red Sea transit routes threatened to exacerbate wartime supply disruptions.
Energy desks priced in a higher geopolitical risk premium after a high-profile diplomatic meeting in Oman between Iran and Gulf Arab states – aimed at negotiating the reopening of the Strait of Hormuz for maritime traffic – was abruptly postponed.
Fed rate hike bets hit 86%
Compounding the energy-driven inflation shock, global financial markets are bracing for a wave of monetary policy decisions over the coming days.
Following last week’s European Central Bank interest rate hike to 2.50%, money markets are now pricing in an 86% probability that the U.S. Federal Reserve will raise its benchmark interest rate by 25 basis points at its Sept. 15-16 FOMC meeting. Swaps traders are also building in high odds of another quarter-point Fed rate increase in December.
Eurozone inflation risks tilting above already elevated forecasts as natural gas and power prices trigger growing concern, ECB policymaker Peter Kazimir warned on Monday.
While stopping short of explicitly demanding a rate hike, the outspoken hawk stressed that keeping an open mind should not be mistaken for hesitation, asserting the central bank will act decisively when evidence warrants.
The Bank of Japan is widely expected to raise rates on Sept. 18 while the Bank of England confronting its own inflation hurdles.
Elsewhere, London-listed dropped 4% and fell 3.2%, following weakness in metal prices.