European stocks stabilized at the opening of trading on Monday, at a time when investors were evaluating the prospects for global investment in artificial intelligence, while attention was focused on anticipated deals in the banking sector, including the banks “Credit Agricole” and “Banco BBM”.
The European STOXX 600 index settled at 648.88 points, by 08:10 GMT, while the mining sector topped the gains, rising 1.4 percent, keeping pace with the rise in precious metal prices, according to Reuters.
Banco BBM shares jumped by 9.4 percent, after the French bank Credit Agricole announced that it proposed merging its subsidiary in Italy with the Italian bank, in a move that would create a unified banking entity that would become the third largest bank in the country.
On the other hand, the shares of the French bank fell by 1.4 percent.
UniCredit shares rose by 3.6 percent, after the bank announced that its profits in the third quarter rose by 24 percent on an annual basis, exceeding analysts’ expectations by a large margin. It also raised its profit target for the full year, at a time when it is preparing to develop a strategy regarding Commerzbank. The German bank's shares rose by 2.5 percent.
Shares of technology companies, such as Extron and ASML, moved between limited gains and losses, after sharp declines recorded last week, amid concerns about the prospects for global investment in artificial intelligence.
A report regarding alleged links between Nvidia CEO Jensen Huang and a Chinese businesswoman accused of passing information to Beijing raised questions about the future of the head of the leading chip manufacturer.
Nvidia shares, listed on the Frankfurt Stock Exchange, fell by 6 percent.
The shares of the German construction company Hochtief fell by 5.3 percent, after ACS, its largest shareholder, announced that it had not considered launching a takeover bid for the German group.
Shares of luxury goods companies, such as LVMH and Burberry, also fell by more than 2 percent each, after data showed weak consumer demand in China last October, which is a major market for European luxury products.
The sharp decline in technology company stocks, with declining confidence in investing in artificial intelligence, raises concerns about the ability of global financial markets to withstand, from New York to Taipei, at a time when pressure is increasing on a number of indicators monitored by regulators and investors to monitor risks in the markets.
Although the Nasdaq 100 index, which is heavy on technology stocks, rose slightly more than 1 percent last Friday, it ended the week down 5 percent, amid continued anxiety among traders, according to Reuters.
Policymakers have long warned of the potential risks of the AI boom fading, while investors and regulators are closely monitoring signs of stress in markets, some of which have begun to trigger warning signals, although they have not yet reached danger levels.
Below are the most prominent indicators that markets are tracking:
High volatility indicators
The VIX index, known as Wall Street's fear index, which measures US stock market volatility, rose to more than 28 points on Thursday, recording the highest level since late March, before closing at just over 25 points on Friday.
Although this increase is still relatively limited, compared to the jump that the markets witnessed following the announcement of US tariffs in April 2025, known as “Liberation Day,” or the selling wave in August 2024, the index rose by more than 30 percent during the past week. The corresponding European index also recorded its highest level since May on Friday.
Idana Abio, portfolio manager at First Eagle Investments, said that it is still too early to assess developments, noting that the source of concern will be recording further jumps in volatility, worsening pressures, and the emergence of real problems in the ability to access markets, which are factors that she will monitor closely.
The high cost of hedging technology sector risks
One of the most prominent indicators that may portend turmoil in the artificial intelligence sector is the sharp rise in the cost of insurance against debt default.
The cost of insuring the debts of the company “Corowave”, which specializes in cloud computing, jumped to levels that reflect severe credit pressures, after spreads on five-year credit risk swap contracts exceeded 1,000 basis points, recording record levels. This indicator has become a measure of investor concern about the artificial intelligence sector.
The spreads on credit risk swap contracts for SpaceX and Intel also increased during the past week.
In the same context, the additional return required by investors to hold high-yield US corporate bonds, known as high-risk bonds, has risen to its highest levels since the “liberation day” unrest, with dealers’ appetite for riskier assets declining.
As for the riskiest segments of the market, related to companies rated at “CCC” or lower, this additional return approached its highest levels since 2020, according to “ICE Bank of America” indicators.
Demand for safe havens
Investors' trend toward safe havens is a clear indication of escalating anxiety in the markets, even though daily movements are still relatively limited.
Ten-year US Treasury bond yields fell by about 50 basis points, compared to peak levels of more than 5 percent recorded last month, amid concerns about rising debt, inflation, and increased competition for financing, with technology companies intensifying their bond issuances.
In the currency markets, movements remained relatively limited, but there were signs of increased investor interest in the US dollar, which rose on Friday by about 0.8 percent, recording its largest daily gains since June.
Three-month cross-currency basis swap contracts for the euro against the dollar briefly touched a level of negative 8 basis points last Thursday, the lowest since late 2023, indicating increased demand for financing in dollars, before recovering to about negative 3.5 basis points by Monday.
In another indication of growing caution, the “Flow Show” report, issued by Bank of America, last Friday, stated that monetary funds attracted inflows amounting to $140 billion during the week ending on Wednesday, in the seventh largest weekly inflows on record.
Bond markets remain stable
On the other hand, bond markets do not yet show signs of the pressures they witnessed during the “Covid-19” pandemic, or in the wake of the customs duties announced within the framework of “Liberation Day.”
The MOV index, which measures fluctuations in the US Treasury bond market, recorded its highest level in six months last October, but has declined since then.
Other bond market indicators, including US interest swap spreads, which can reflect funding and liquidity pressures, have remained stable so far.
