Payrolls in Focus as AI Rally Cools – Europe Market Wrap

US equity futures pointed lower as investors continued to unwind positions in the AI trade, putting the S&P 500 on course to miss out on a historic 10th consecutive week of gains. Futures on the benchmark fell 0.4%, while Nasdaq-100 futures dropped 1%, extending losses following Thursday’s sharp selloff in semiconductor stocks.

The latest weakness was driven by concerns that expectations surrounding AI-related earnings growth may have become stretched. Sentiment deteriorated after Broadcom delivered a chip sales outlook that failed to meet elevated market expectations, prompting investors to reassess valuations across the technology sector. The move marked a further rotation away from the market leaders that have powered much of this year’s rally.

Attention also remained firmly on US economic data, with traders awaiting May payrolls figures for further clues on the path of Fed policy. Treasury yields were little changed ahead of the release, with the 10-year yield holding around 4.47%. A resilient labor market would reinforce expectations that interest rates are likely to remain higher for longer.

In commodities, Brent crude slipped modestly toward $94.80 per barrel. However, ongoing uncertainty surrounding negotiations in the Middle East continued to underpin energy markets, with the absence of a diplomatic breakthrough keeping concerns over supply disruptions alive.

Meanwhile, the US Dollar headed for its largest weekly decline in more than a week, reflecting a cautious market tone as investors balanced softer risk sentiment against expectations for restrictive monetary policy. Overall, markets ended the week focused on two key themes: whether the AI-driven rally has become overextended and whether incoming economic data will justify the current higher-for-longer interest rate narrative.