European Stocks Falter as AI Concerns and Fed Rate Bets Weigh on Sentiment

European stock markets started the week on a cautious note Monday, pressured by a downturn in technology shares and broader investor anxiety ahead of key central bank decisions and amid rising energy prices.

The pan-European STOXX 600 index was trading flat, according to market data. Germany’s DAX was also little changed and France’s CAC 40 slipped 0.2%, while London’s FTSE 100 rose 0.5%.

Tech Sector Hit by AI Development Concerns

Rate-sensitive technology and semiconductor stocks came under pressure after the leaders of OpenAI and Anthropic jointly called for a temporary slowdown in advanced AI model development, citing safety concerns. The news triggered a sell-off in AI-linked European firms.

Key stock movements included:

• ASML fell 4.4%
• BE Semiconductor dropped 5.2%
• STMicroelectronics slid 3.4%

Inflation Fears Rekindled by Surging Oil

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Compounding market concerns, Brent crude futures jumped another 3% to trade near $112 a barrel. The move extends a multi-week rally and was driven by a higher geopolitical risk premium following reports of new attacks on Saudi Arabian oil infrastructure and the postponement of diplomatic talks to reopen the Strait of Hormuz.

Persistent strength in energy prices adds to inflationary pressures, complicating the task for central banks aiming to control consumer price growth.

Central Bank Decisions Loom Large

Global markets are bracing for a wave of monetary policy decisions. Following last week’s rate hike from the European Central Bank, attention has shifted to the U.S. Federal Reserve's meeting on Sept. 15-16. Money markets are now pricing in an 86% probability that the Fed will raise its benchmark interest rate by 25 basis points, according to reports.

Investors also await policy announcements from the Bank of Japan and the Bank of England later in the week, creating a high-stakes environment for global equities.