Following the sell-off in Asia, European stock indices have fallen more modestly.
The FTSE 100 index in London has slipped by 0.1%, falling to 9,703. The Dax in Frankfurt and the Ibex in Madrid both lost nearly 0.8% while the CAC in Paris and the FTSE MiB in Milan are both down by 0.3%.
“Global equity markets faced a heavy selloff on Tuesday as a cumulation of several factors have led to a rise in uncertainty and risk aversion,” said Daniela Hathorn, senior market analyst at Capital.com.
Today, Asia kicked off the session with another round of selling pressure but the majors have been able to claw back throughout the day, leading to a more stable open in Europe. With the market’s usual data feeds on pause due to the US government shutdown, investors are increasingly reliant on less predictable signals and commentary. That vacuum has heightened sensitivity to policy communication and elevated fears about how long economic and earnings momentum can hold without fresh supporting evidence.
The tech sector, which has been the key powerhouse behind the rally this year, was dragged down by a sharp selloff in Palantir after releasing its earnings, despite reporting a stellar quarter and improving its forward guidance. This momentum shows how investors are starting to question whether these lofty valuations need more than just good earnings to keep them going, leaving the wider equity space exposed to continued downside given the narrow breadth of the current market.
Compounding this data gap is a growing concern that global economic growth may be softening, with a soft PMI reading in the US adding fuel to the fire. At a time when markets have continuously been breaking record highs, modest disappointments or ambiguous indications from macro or corporate fronts are enough to trigger outsized reactions. The Federal Reserve’s unwillingness to commit to further rate cuts at last week’s meeting has been a clear example of that.
Overall, the AI-investment boom that has fuelled the rally in 2025 has created exceptionally high expectations for continued earnings growth, but recent signs of cooling demand, rising costs, and tighter policy conditions have prompted investors to question whether those valuations are still justified.
