European stock markets declined sharply on Friday as investors assessed the implications of the Democratic Party’s sweeping victories in the US midterm elections, amid concerns that changes in American policy could slow investment in artificial intelligence infrastructure.
Market sentiment was also affected by questions surrounding the profitability of AI-related investments and weaker-than-expected momentum in German industrial production.
Germany’s DAX fell 2.2%, while the UK’s FTSE 100 declined 1.9%. France’s CAC 40 dropped 1.6%, reflecting broad selling pressure across major European markets.
AI Investment Concerns Weigh on Market Sentiment
The US election results prompted concerns that potential policy changes could affect the pace of AI infrastructure development, putting pressure on technology-related investments.
SoftBank Group (TG:SFT) saw the spread on its five-year credit default swaps rise to a four-year high, indicating increased investor concern about credit risk and the profitability of its AI investments.
The move highlighted growing uncertainty over the financial returns associated with large-scale artificial intelligence infrastructure spending.
German Industrial Production Growth Slows
Economic data from Germany added to the cautious market mood, showing slower growth in industrial production during September.
Output increased 0.7% month over month, compared with a revised 1.0% expansion in August.
On an annual basis, industrial production rose 0.4%, slowing from the previous month’s 0.7% increase.
The figures suggested that Germany’s manufacturing recovery remained uneven, adding to concerns about the outlook for Europe’s largest economy.
German Companies Deliver Mixed Earnings Performance
German wind turbine manufacturer Nordex (TG:NDX1) declined 1.1% despite reporting strong third-quarter results and confirming an increase to its full-year 2026 EBITDA margin guidance.
Packaging and bottling equipment producer Krones (TG:KRN) gained 1% after reporting a 2.9% increase in order intake during the first nine months of the year.
Meanwhile, engine manufacturer Deutz (TG:DEZ) fell 4% after its third-quarter net income came in below market expectations.
Travel and Airline Stocks Advance
Several European travel companies recorded gains despite the broader market decline.
Spanish travel technology provider Amadeus IT Group (BIT:4AMS) advanced nearly 2% after reporting third-quarter earnings in line with analysts’ expectations.
International Airlines Group (LSE:IAG), the parent company of British Airways, rose approximately 1% after announcing a 5% increase in third-quarter revenue.
Air France-KLM (EU:AF) climbed nearly 4% after reporting a favourable decision from the Court of Justice of the European Union, which set aside a February 2024 judgment by the General Court.
The ruling provided a positive development for the Franco-Dutch airline group.
Teleperformance Slumps as Banco BPM Considers Merger
French outsourcing company Teleperformance (EU:TEP) plunged 16% in Paris after lowering its full-year revenue growth forecast.
The revised outlook triggered a sharp negative market reaction as investors reassessed the company’s near-term growth prospects.
In Italy, Banco BPM (BIT:BAMI) declined 2.3% after indicating that it would be willing to consider a merger with Crédit Agricole Italia.
The announcement introduced the possibility of further consolidation within the Italian banking sector.
European Markets Face Political and Economic Uncertainty
Friday’s declines reflected a combination of US political developments, concerns about AI investment returns and weaker industrial momentum in Germany.
Although individual corporate announcements supported gains in selected travel and industrial stocks, broader market sentiment remained negative.
Investors will continue monitoring potential changes in US policy, developments in artificial intelligence infrastructure spending and European economic indicators for signs of a shift in market direction.
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