European stock markets started February on a low note, with major indexes like the STOXX 50 and STOXX 600 both losing value. This decline followed a global trend where investors pulled their money out of riskier investments.
Two main factors caused this: first, a massive sell-off in commodities like oil and metals, and second, renewed worries that Artificial Intelligence (AI) companies might be overvalued.
The mood shifted largely because of news from the US and the tech world. Investors are nervous about Kevin Warsh being nominated to lead the US Federal Reserve, fearing he will take a “tougher” approach to the economy.
At the same time, a report revealed that Nvidia is reconsidering a massive $100 billion investment in OpenAI, which caused tech stocks to slide.
While big energy and mining companies like Shell and Rio Tinto saw their stock prices drop, some consumer companies like Nestlé and Unilever actually managed to gain value as investors looked for safer places to put their money.
On the FX front, the US dollar remained strong on Monday as investors processed the news that Kevin Warsh has been nominated to lead the Federal Reserve. This nomination has given the dollar a boost because traders expect Warsh to be more focused on controlling inflation.
Meanwhile, the Japanese yen is back in the spotlight after Prime Minister Sanae Takaichi spoke in favor of a weaker currency to help Japanese exporters. This message contradicts her own finance officials, who have been trying to stop the yen from losing too much value, leading to some confusion and volatility in the market.
In Europe and the UK, the euro and the pound remained mostly steady as investors wait for upcoming interest rate decisions from their central banks later this week.
Elsewhere, the Australian dollar fell slightly before its own central bank meeting, while the Canadian and New Zealand dollars also saw small drops.
Additionally, the dollar grew stronger against the Norwegian krone because oil prices crashed by 5%.
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