Europe close: AI slowdown fears, oil prices pull markets lower

(Sharecast News) - European stock markets finished lower on Monday as a sell-off in the chip and AI sectors and another surge in oil prices weighed heavily on markets, though London's FTSE 100 outperformed.

The pan-European Stoxx 600 benchmark finished 0.5% lower at 635.99, with heavy losses registered in Milan (-1.7%) and Spain (-1.4%) and moderate losses in Frankfurt (-0.5%) and Paris (0.8%), only partially offset by gains in London (0.4%).

This was the third fall in four days for the Stoxx 600, which settled marginally above the 635.97 reached last Thursday, which was its lowest closing price since 8 July.

Weighing on the semiconductor and AI sectors were recent comments by Anthropic boss Dario Amodei, who called for the pace of AI development to slow down due to "serious" risks associated with the rapid pace of advancements.

"I have become convinced that fully addressing the risks requires even more prudence - not just investing in risk prevention, but pacing the rate of capabilities advancement so that risk prevention has time to keep up," Amodei wrote in an online essay.

"We must slow the pace at which we improve the capabilities of AI models. Progress will still seem fast, and we must make wise use of the time we gain."

The comments, publicly backed by OpenAI's Sam Altman and Elon Musk, hammered shares across sectors related to AI, with tech infrastructure companies Nokia, Hochtief and Siemens Energy falling sharply, along with semiconductor peers ASM International, Infineon Technology and BE Semiconductor Industries.

In contrast, London stocks were outperforming, underpinned by strength in the software sector amid a wider AI sell-off, with Sage Group, Relx, LSEG and Experian among the top performers on the FTSE 100.

Elsewhere, share prices of Euronext and Deutsche Boerse both gained after Euronext's chief executive said he was open to a merger of the two marketplaces. In an interview with the Financial Times, Stéphane Boujnah said: "On the big bang deal, the antitrust issues are well known [...] but on paper it is interesting for Europe to consider the creation of a pan-European market infrastructure which has a planetary scale."

Also hitting sentiment were rising bond yields, as the 10-year US Treasury yield briefly topping the 5.0% mark, its highest since 2007 before pulling back, amid concerns about rampant inflation. Bond yields across Europe were also on the rise, including Germany, Italy, Spain and the UK.

Risk appetite was also being scaled back ahead of this week's Federal Open Market Committee meeting, which concludes on Wednesday, amid rising speculation that the Federal Reserve will hike interest rates. Market watchers have priced in a hike of 25 basis points by the Fed on Wednesday at 86% amid concerns about the impact of an energy supply crisis on inflation.

Meanwhile, oil prices gained after new strikes on Saudi Arabia, attacks on vessels near the Strait of Hormuz and the shutdown of Saudi Arabia's East-West pipeline. Brent crude was up 2.3% at $106.98 a barrel.