European markets open mixed after AI-led sell-off hits Asia; South Korea plunges over 5%

Market snapshot

European stock markets opened on a cautiously mixed footing on Friday after sharp declines in Asia, where a sell-off in artificial intelligencelinked shares hit major technology exporters. London and Frankfurt moved into negative territory early, with the FTSE 100 down about 0.4% and the DAX losing roughly 0.3% at the open. Pariss CAC 40 and Madrids IBEX 35 were each up 0.3%, Milan was flat, and the EURO STOXX 50 opened little changed.

Investors are positioning ahead of the latest US non-farm payrolls report and watching geopolitical developments in the Middle East. The US jobs data will be closely parsed for clues about the Federal Reserves next policy step. Kathleen Brooks, research director at XTB, noted there is now close to a 40% chance of a rate hike by year-end and warned that markets are likely to be highly sensitive to todays data. The article also flags that this will be the first such report with Kevin Warsh as chairman of the Federal Reserve.

House-price data from the UK added to the cautious tone: Halifax reported that house prices unexpectedly fell 0.1% month-on-month in May, leaving annual growth at 0.5% instead of the expected 1% rise.

Oil, currencies and safe-haven flows

Oil steadied after Thursdays drop. Brent crude the international benchmark was trading around $94.73 per barrel at 10:00 CET, while US benchmark crude was near $92.51 a barrel. Both remain well above pre-war levels, and market participants said supply uncertainty in the Strait of Hormuz and wider war-related disruptions continue to underpin prices. Negotiations between the US and Iran produced a tentative extension to a ceasefire last week, but the deal is not final and renewed hostilities in Lebanon, including Hezbollahs rejection of a recent ceasefire, have kept risk premia in energy markets elevated. ING strategists Warren Patterson and Ewa Manthey said oil markets are still trading on expectations of an imminent deal that would restore flows through the Strait of Hormuz.

In currency and precious-metal trading, the US dollar eased slightly against the yen to about 159.96 JPY from 160.03, and the euro was trading near $1.1635, up about 0.2%. Gold prices ticked down roughly 0.3% to around $4,490.70 (note: source figure appears unusually large for troy-ounce pricing; this preserves the original report).

Asia sell-off led by AI-related names

The global risk rotation that lifted banks and cyclicals earlier in the week reversed sharply in Asian markets as momentum in AI-related stocks cooled. South Korea was particularly hard hit: the Kospi plunged about 5.1% to 8,199.44 after large losses in major chipmakers. SK Hynix fell about 8.6% and Samsung Electronics shed roughly 5.4% as investors pulled back from previously hot technology positions an abrupt retracement after an outsized run over the last year.

Japans Nikkei 225 slipped about 1.3% to 66,573.85, led lower by technology shares; chip-equipment maker Tokyo Electron dropped around 7% despite official data showing Japans real wages rose for a fourth consecutive month. Hong Kongs Hang Seng declined about 1.2% to 24,948.96 and the Shanghai Composite lost around 0.3% to 4,045.45. Australias S&P/ASX 200 fell roughly 0.7% to 8,623.50. Taiwans Taiex and Indias Sensex moved in opposite directions early, with the Taiex down about 1.3% and the Sensex up 0.1%.

The Asian downturn followed mixed moves on Wall Street on Thursday. The S&P 500 extended a long winning streak earlier in the week but saw a rotation away from high-multiple AI names into banks, small caps and other previously lagging sectors. The S&P 500 nevertheless rose about 0.4% on Thursday, the Dow Jones Industrial Average gained 1.7% to a record high, while the Nasdaq Composite edged down about 0.1%.

US market internals showed banks outperforming: Goldman Sachs climbed about 5%, Fifth Third Bancorp jumped around 4.7% and U.S. Bancorp rose about 4.4%. That helped offset weakness in several AI-angled technology names. Broadcoms shares plunged roughly 12.6% after its guidance disappointed investors, stoking concerns about demand for AI-related chips and software. Micron Technology fell about 7.7%, and cybersecurity firm CrowdStrike lost roughly 3.8%.

What this means for investors

The broad lesson for markets this week is one of rotation and sensitivity: long rallies in concentrated areas in this case AI-related hardware and software stocks can reverse quickly, triggering outsized moves in regional indices that are heavily exposed to a handful of large technology firms. With major macro data due and geopolitical risk still unresolved in the Middle East, market participants said volatility could persist.

In the near term, attention will be on US payrolls for signals about the Feds next move and on any tangible progress in diplomatic efforts that could ease flows through the Strait of Hormuz and reduce the energy risk premium. For now, investors appear to be trimming richly valued AI positions while reallocating into financials and other sectors they believe may perform better if growth surprises and bond yields remain subdued.

The European session will likely track US job-market headlines and further developments from Asia, where profit-taking in technology and chip names has created significant near-term downside pressure.