The FTSE 100 (^FTSE) and European stocks struggled to find momentum on Tuesday as the Bank of England (BoE) stated that risks to the UK’s financial system had increased this year due to stretched valuations of companies investing in AI, risky lending to large companies, and some trading in government bonds.
“Risks to financial stability have increased during 2025,” the BoE said in its half-yearly Financial Stability Report.
“Global risks remain elevated and material uncertainty in the global macroeconomic outlook persists. Key sources of risk include geopolitical tensions, fragmentation of trade and financial markets, and pressures on sovereign debt markets,” it added.
Investor enthusiasm for AI has pushed equity valuations in the US to their highest levels since the dotcom bubble and lifted UK valuations to peaks not seen since the global financial crisis.
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London’s benchmark index (^FTSE) was down 0.1% in early trade to 9,702 points
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Germany’s DAX (^GDAXI) rose 0.2% while the CAC (^FCHI) in Paris headed 0.2% into the red
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The pan-European STOXX 600 (^STOXX) was down 0.1%
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Wall Street is set for a sluggish start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red.
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The pound was muted against the US dollar (GBPUSD=X) at 1.3212
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