FRANKFURT: European shares edged lower on Friday as concerns about potential AI-driven disruptions kept investors cautious, while they also assessed a mixed bag of corporate earnings and economic data.
The pan-European STOXX 600 index closed 0.13 percent lower at 617.7 points. However, it capped a turbulent week with a marginal gain of 0.09 percent.
Since late January, a cascade of new artificial intelligence tools has sent shockwaves through global markets. Investors tried to weigh the impact of newer models on traditional businesses, at a time when major tech firms have forecasted higher spending to develop the technology.
Disappointing gross margins from US-based Cisco Systems this week added to jitters.
So far, logistics companies, insurers, index operators, software companies and asset managers in Europe have borne the brunt of the selloff.
The banking sub-index led the losses this week, down 5.4 percent, with the sharpest weekly fall in over 10 months.
The financials-heavy Italy benchmark slid 1.7 percent on Friday.
While tech shares climbed 1.7 percent on the day, the sector also remained among the week’s laggards.
“The narrative here is about AI overinvestment, valuations and disruption,” said Kyle Rodda, senior financial market analyst at Capital.com.
“That is: AI companies are spending big and leveraging up to stay ahead in the AI arms race, reducing potential returns on capital, as new disruptive models hit the market and cast doubt over to whom the spoils of the AI boom will go.”
On the data front, US consumer prices increased less than expected in January, prompting traders to marginally increase bets on a Federal Reserve interest-rate cut in June.
There was some relief on the earnings front. European companies’ quarterly earnings are now expected to fall 1.1 percent on a year-on-year basis, improving from the 4 percent decline projected earlier, according to data compiled by LSEG.
Still, it is expected to be the worst earnings performance in the past seven quarters, as companies navigate steep US tariffs.
The defence sector led gains on Friday, rising 3.3 percent. Aerospace group Safran jumped 8.3 percent to a record high after forecasting increased revenue and earnings for 2026.
Capgemini climbed 5.1 percent after the French IT services group reported full-year revenue that beat its own target.
By contrast, L’Oreal slipped 4.9 percent after the owner of Maybelline make-up missed fourth-quarter sales growth estimates. The broader personal and household goods sector fell 0.8 percent.
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