European markets head lower after Nvidia led US market selloff

• European stocks fall as French election looms
• BoJ could raise rates and announce tapering plan next month
• Nvidia slump hurts S&P 500, but rotation is good for market health

European markets have failed to maintain the positive momentum established yesterday, with the growing concerns over this weekend’s French election rather predictably helping to undermine any short-term strength for mainland equities. Coming off the back of a US session that had seen weakness across both the Nasdaq and S&P 500, that same downbeat tone appears to be evident in Europe despite a lack of any particularly notable economic releases this morning. Energy stocks have provided the one bright spot for the FTSE 100 despite weakness for crude oil this morning, with gains for Shell and BP helping to offset some of the losses led by Rolls Royce (-4.6%).

The Nikkei proved resilient to the threat of any monetary tightening from the BoJ, with comments from the bank highlighting the strong chance that they will hike rates in July. With the bank also expected to announce a plan to taper bond purchases at their upcoming meeting, traders will be watching closely to see if this will finally turn the tide on the Japanese Yen. Overnight inflation data helped bolster the BoJ’s hawkish claims, with the core CPI figure posting its first monthly gain in nine-months (2.1%).

The collapse in Nvidia shares have seen the tech giant fall 15% immediately after overtaking Microsoft to become the world’s most valuable company. With Nvidia having seen its market capitalization rise from $1.2 trillion to $3.4 trillion in less than six-months, traders have grown increasingly uncomfortable with the market’s overreliance on a single stock. Nonetheless, the recent weakness seen for Nvidia and the semiconductor space has ultimately helped drive a rotation into the rest of the market, helping to improve the breadth and perceived stability of the S&P 500. With the second quarter drawing to an end, this rebalancing could be short-term in nature. However, the impending Q2 earnings season will likely start to shift the onus back onto the question of whether the strength of the market will continue to be underpinned by strong earnings growth.