Europe Outruns U.S. in October as AI Trade Loses Steam

European equities outperformed U.S. stocks in October as concerns over returns on heavy AI spending prompted a shift toward more defensive sectors. On October 31, the STOXX Europe 600 closed down 0.4%, trimming its October gain to about 2%. Healthcare and food-and-beverage shares led in Europe, while technology and mining stocks lagged. The relative resilience came as global equities sold off and disappointing results from Amazon and Intel renewed scrutiny of large AI-related capital expenditures. Asian markets also declined, with South Korea's Kospi, viewed as a gauge of AI-trade sentiment, falling 3.5%. A UBS basket of European AI beneficiaries dropped 4.9%. The STOXX Europe 600 was set to outperform the S&P 500 for October, with the U.S. index pressured by its heavier technology weighting. Investors shifted toward defensive European sectors during the month, while banks and basic resources, which had performed strongly earlier in the year, lagged.