Stoxx 600, Fed cut, AI bubble, China economy

European stocks closed sharply lower on Friday as concerns about an artificial intelligence bubble and the global economy shook investor confidence.

The pan-European Stoxx 600 ended the session more than 1% down, with all of the region’s major bourses closing sharply lower.

The regional Stoxx Technology index fell 1.4%, tracking losses on Wall Street the previous day that saw Big Tech stocks battered in a broad sell off.

In Europe, Infineon, down 1.6%, SAP, down 3.2%, and BE Semiconductor, down 1.8%, were among the worst performing tech stocks on Friday.

SAP announced Friday that it will offer concessions to settle an EU antitrust probe. European lawmakers were investigating the German firm’s management of its flagship Enterprise Resource Planning software.

Elsewhere, shares in Danish weight-loss drugmaker Novo Nordisk finished down 2.4% after shareholders voted to replace its independent board members in a shake-up of the company’s leadership.

Investor attention is also focused on the global economy.

China’s slowdown ramped up in October, with data showing fixed asset investment – which includes the country’s closely watched real estate sector – contracted in the first 10 months of the year. Retail sales softened, and industrial output growth also slowed.

Comments from Federal Reserve officials in recent weeks have prompted money markets to reconsider the likelihood of a December rate cut from the central bank. By Friday morning, markets were pricing in a 54.4% chance of the Fed not cutting at its next meeting. A month ago, the market had assigned a 95% probability to an end of year cut.

Back in Europe, yields on U.K. government bonds — known as gilts — spiked on Friday, amid reports that the Labour government was U-turning on an income tax raid that had been planned as part of the looming Autumn Budget. The yield on the benchmark 10-year gilt was 13 basis points higher, to 4.571%.

Bond prices and yields move in opposite directions, meaning a spike in yields represents a sell off of the assets.

The British pound also fell as markets reacted to the reports. Sterling was last seen trading lower against both the U.S. dollar and the euro, down over 0.28% and 0.15%, respectively.

Corporate earnings also continue to hold the spotlight in Europe, with German insurer Allianz among the companies reporting on Friday.

Allianz said it had achieved record results in the first nine months of the year, bolstered by double-digit growth in operating profit in the third quarter. Operating profit for the three months to September jumped 12.6% to 4.4 billion euros ($5.1 billion), largely driven by the firm’s Property-Casualty division.

The company said it expects to achieve an operating profit of at least 17 billion euros this year, which sits in the upper end of its full-year guidance range.  

Allianz shares ended the day 1.2% higher.

Meanwhile, Richemont shares finished 5.9% higher, after the Cartier-owner reported a 14% jump in fiscal second-quarter sales at constant exchange rates.

China, Hong Kong and Macau sales returned to growth in the period, the company said, in another sign of a broader recovery for the luxury sector after sales suffered amid weak demand from Chinese consumers. Peers LVMH and Burberry also posted strong results this earnings season.

— CNBC’s Elsa Ohlen contributed to this report.