Stock markets on both sides of the Atlantic posted moderate gains Tuesday on Fed rate cut speculation, but tech sector weakness undermined the bullish sentiment, dealers said.
Shares of artificial intelligence star Nvidia tumbled on Wall Street, following a report in The Information that Facebook parent Meta could use Google chips in its data censors.
Investors in tech stocks have been trying to move past fears that AI enthusiasm may have created a bubble that is waiting to burst.
"AI remains one of the most powerful forces reshaping markets, but the tone is changing," wrote Saxo Markets' Charu Chanana.
"Strong earnings from leading chipmakers (led by Nvidia)... reassure investors that demand is real, yet the sharp swings in market reaction show that enthusiasm now sits alongside questions around sustainability, profitability, and execution."
Expectations that the US Federal Reserve will cut interest rates next month added support to equities, while weighing on the dollar.
Lower interest rates typically weaken a currency, especially when there are lingering inflationary pressures.
Fed governor Christopher Waller said Monday inflation was not his main worry and that he was "advocating for a rate cut at the next meeting".
US data pointing to labour market softness and weaker-than-expected retail sales numbers further fuelled rate cut expectations, especially as the figures raised concerns about US consumer confidence, said Bret Kenwell, at the eToro trading platform.
"The economy can't afford to lose the consumer, particularly ahead of the all-important holiday season," he said. "It's something to watch moving forward."
Traders now see about a 90 percent chance of a rate reduction, against around 35 percent only last week -- but not everyone saw this as a good thing.
"The last time we saw Fed rate expectations change that fast — September 2024 — the last-minute 50 bp cut turned out to be a mistake, and the Fed had to pause for a year before moving again," said Ipek Ozkardeskaya, an analyst at Swissquote, an investment firm.
"Did it prevent the bulls from buying? Not really," she added.
Oil prices slumped amid reports that a deal to end the war in Ukraine may be close which, if confirmed, would allow Russia to export vastly more oil.
- Key figures at around 1535 GMT -
New York - Dow: UP 0.7 percent at 46,791.88 points
Nasdaq - DOWN 0.3 percent 22,811.00
London - FTSE 100: UP 0.8 percent at 9,609.53 (close)
Paris - CAC 40: UP 0.8 percent at 8,025.80 (close)
Frankfurt - DAX: UP 1.0 percent at 23,464.63 (close)
Tokyo - Nikkei 225: UP 0.1 percent at 48,659.52 (close)
Hong Kong - Hang Seng Index: UP 0.7 percent at 25,894.55 (close)
Shanghai - Composite: UP 0.9 percent at 3,870.02 (close)
Euro/dollar: UP at $1.1570 from $1.1523 on Monday
Pound/dollar: UP at $1.3186 from $1.3110
Dollar/yen: DOWN at 156.10 yen from 156.81 yen
Euro/pound: DOWN at 87.76 pence from 87.91 pence
Brent North Sea Crude: DOWN 2.5 percent at $61.16 per barrel
West Texas Intermediate: DOWN 2.7 percent at $57.27 per barrel
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