European stocks rise, Nvidia drags down Nasdaq

AFP , Monday 24 Jun 2024

European stock markets rebounded on Monday despite jitters over the first round of French elections taking place this weekend.

Stock Exchange
In this file photo, a sign at the New York Stock Exchange is shown in New York. AP


However shares in Nvidia fell by more than six percent as the AI darling stock continues a slump and raises concerns whether the tech share boom was in reality a bubble.

"European markets are in recovery mode, with widespread gains taking shape," said Shore Markets analyst Joshua Mahony.

"Despite ongoing concerns around this weekend's French parliamentary election, French stocks are on the rise as investors buy the dip that saw the CAC lose almost 10 percent in a month," he said, referring to the Paris benchmark stock index CAC 40.

President Emmanuel Macron threw markets into turmoil by calling the snap legislative polls after his centrist party was trounced by the far-right National Rally (RN) in European Parliament elections two weeks ago.

Certain opinion polls showed the RN garnering 35-36 percent of voting intentions for Sunday's first round, ahead of a left-wing alliance on 27-29.5 percent and Macron's centrists in third on 19.5-22 percent. The second round will be held on July 7.

"The positive tone being taken by European markets could yet come into question as we get closer to this potential seismic shift in French politics," cautioned Mahony.

Investors meanwhile set aside a key survey showing that German business sentiment unexpectedly fell in June, pouring cold water on hopes Europe's biggest economy is on course for a strong rebound.

"Today's results add to the growing stream of indicators sending mixed signals on where the eurozone's biggest economy is heading," said Oxford Economics analyst Mateusz Urban.

- Nvidia struggles -
Wall Street's main indices were mixed in late morning trading, with the Dow and S&P 500 advancing while the tech-heavy Nasdaq Composite was dragged down by shares in Nvidia.

Shares in the company that produces processors prized by AI firms have boomed in recent months, leading a rally that has seen Wall Street set fresh records.

"Some profit taking seems entirely reasonable given Nvidia's meteoric rise," said David Morrison, senior market analyst at Trade Nation, noting the stock was up over 180 percent this year alone.

It has lost over 16 percent since setting a record high on Thursday.

"But if it continues to lose ground, then there's a danger of contagion, with selling spreading to other big tech names," he warned.

He added that this could lead to a deeper and more protracted pull-back for tech stocks.

Kathleen Brooks, research director at XTB, said part of the explanation in the drop was due a large exchange traded fund (ETF) rebalancing its holdings.

Another reason is "that retail traders and speculators are taking profits as we move into the slower peak summer months."

She added: "This does not mean that tech is in a bubble, rather that traders are looking for value elsewhere."

Investors are also tracking developments in Japan as the yen struggles against the dollar, leading the country's top currency official to warn that authorities were ready to step in to provide support as the unit hovers around three-decade lows.

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