Tuesday, March 24

London stocks slip as Bank of England flags AI-driven valuation risks


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.

  • London’s benchmark index (^FTSE) was down 0.1% in early trade to 9,702 points

  • Germany’s DAX (^GDAXI) rose 0.2% while the CAC (^FCHI) in Paris headed 0.2% into the red

  • The pan-European STOXX 600 (^STOXX) was down 0.1%

  • 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.

  • The pound was muted against the US dollar (GBPUSD=X) at 1.3212

Follow along for live updates throughout the day:

LIVE 4 updates

  • Wall Street overnight: Dow, S&P 500, Nasdaq slide as bitcoin tumbles

    My Yahoo Finance colleagues from across the pond write:

  • On The Beach posts higher annual profits

    On The Beach (OTB.L) has reported higher annual profits and stated it is confident of achieving another record summer, as under-pressure consumers “protect their holiday”.

    The holiday firm reported an 11% rise in pre-tax profits to £27.9m for the year to September 30 as revenues lifted 1.8% to £121.4m.

    It said: “Demand for On the Beach holidays remains strong and, despite the broader consumer environment, booking trends indicate that consumers will continue to protect their holiday.”

    Bookings for winter are 15% higher year on year while they are 8% up for summer next year, according to the group.

  • Average UK house price rises to £272,998 in November

    The average cost of a home in the UK rose to £272,998, with house price growth slowing slightly on an annual basis in November.

    Nationwide’s (NBS.L) latest house price index, released on Tuesday, showed that annual house price growth softened to 1.8% in November, down from 2.4% in October.

    Read the full article here

  • BoE warns equity valuations near dotcom-era extremes

    The Bank of England has cautioned that equity valuations in the United States are approaching levels last seen during the “dot-com bubble”, while UK stock prices are nearing their most elevated point since the 2008 financial crisis.

    In its latest Financial Stability Report, the BoE said that share prices, particularly among technology companies tied to artificial intelligence, remain “materially stretched” and vulnerable to “a sharp correction.” The report concludes that overall risks to financial stability have risen in 2025.

    Mounting investor unease over the possibility of an AI-driven market reversal has contributed to recent volatility across global markets. The warning comes after a period in which large tech and AI-focused firms have ramped up their investments and experienced a surge in valuations.

    Despite the heightened risks, the BoE reiterated that the UK’s financial system remains resilient. It stated that the domestic banking sector is sufficiently robust to continue supporting households and businesses, even if economic conditions were to deteriorate substantially.

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