European stocks opened lower Thursday, retreating from Recent Record High, as investors weighed the risk of a market correction and sought safer assets amid global uncertainty.
Gold remained above $4,000 for the first time, reflecting heightened demand for safe haven assets amid a weaker dollar and geopolitical tensions.
Wall Street hit fresh record highs in the previous session, driven by gains in technology stocks, despite a partial US government shutdown leaving traders without key economic data. European markets, however, struggled to follow the momentum, with banking shares leading the declines.
JPMorgan Chase Chief Executive Jamie Dimon warned Wednesday of a heightened risk of a significant US stock market correction over the next six months to two years, citing geopolitical tensions, government spending pressures, and global remilitarization.
“We are seeing extreme valuations in certain sectors without the supporting economic data,” Dimon said. Meanwhile, political risks in France and Japan have added to investor caution.
French President Emmanuel Macron announced he would appoint a new prime minister by Friday, raising hopes that a snap election could be avoided and a national budget agreed.
In Japan, policymakers debated the benefits of a weaker yen amid rising import costs and potential fiscal stimulus under likely new premier Sanae Takaichi.
Market analysts said the current environment reflects a mix of optimism and caution. “Investors are caught between record highs in equities and real economic uncertainty,” said Helen Garcia, a senior strategist at Global Asset Advisors.
“The surge in gold above $4,000 signals a strong desire for safe haven protection while markets digest geopolitical news.” Kristalina Georgieva, managing director of the International Monetary Fund, forecast a slight slowdown in global growth in 2025 and 2026.
The world economy has shown resilience, but investors should remain vigilant, she said Wednesday. China’s recent tightening of export controls on rare earth technology also added to the market backdrop, prompting concerns over supply chain constraints for advanced technology sectors.
The 10 year French government bond yield stood at 3.5082 percent, while Germany’s benchmark 10 year yield was 2.692 percent. The dollar index inched up 0.1 percent to 99.971 but remained down nearly nine percent on the year.
The euro fell 0.1 percent to $1.1615, marking its fourth consecutive day of declines. The Japanese yen hit an eight month low of 153 per dollar overnight before slightly recovering to 152.76.
Analysts noted that a weaker yen could benefit Japan’s export driven economy despite rising costs for households.
Oil prices remained steady, reflecting uncertainty over whether the ceasefire and hostage deal between Israel and Hamas, announced late Wednesday, would hold.
European investors expressed a mix of caution and optimism. “We are seeing tech stocks soar in the US, but European banks are under pressure,” said Pierre Dubois, a portfolio manager in Paris.
“Gold climbing past $4,000 confirms that investors are hedging against risks we cannot yet quantify.”
In London, retail investor Angela Reed said she has increased her exposure to precious metals. “Equities are tempting, but with so many global risks, I feel safer keeping part of my portfolio in gold,” she said.
Analysts in Tokyo noted that while the weaker yen could help exporters, rising energy and food costs might weigh on household spending.
“The policy debate is critical. Aggressive fiscal measures could offset the impact, but timing and execution remain uncertain,” said Kenji Morimoto, an economist at Tokyo Economic Research.
Economists and market watchers said the coming weeks could see volatility as investors await further economic data from the United States and developments in Europe and Asia.
The balance between equity market optimism and safe haven demand, particularly in gold, will likely continue to influence trading behavior.
“Markets are at a delicate point,” Garcia said. “Any unexpected geopolitical event, US fiscal developments, or central bank announcement could trigger a reassessment of risk, potentially affecting both equities and commodities.”
European stocks pulled back from recent record highs Thursday, reflecting investor caution amid banking sector weakness, geopolitical uncertainties, and a partial US government shutdown.
Gold held above $4,000, supported by safe haven demand and a weaker dollar. Analysts cautioned that markets may face continued volatility, while policymakers in France, Japan, and China influence both equities and commodities.
The coming weeks are likely to be shaped by economic data, geopolitical developments, and investor sentiment as markets navigate these complex dynamics.