European Stocks Rebound as Fed Eases, Tech Selloff Worsens Oracle's Slide

European stocks advanced on December 11, 2025, as investors shifted money into sectors tied to economic growth, such as construction materials and banking. The Stoxx Europe 600 index climbed 0.5% as of 2:59 p.m. in London, while travel and retail stocks also gained ground. Defensive sectors like utilities and real estate lagged, reflecting a broader rotation in market sentiment.

The movement came as the Federal Reserve cut interest rates by 25 basis points earlier in the day, signaling a cautious approach to future monetary policy. The decision followed Oracle Corp.'s disappointing results, which raised concerns over the profitability of AI investments. Oracle's stock fell sharply, dragging down tech names and fueling worries about overvaluation.

Oracle, a key player in cloud computing and AI infrastructure, reported cloud sales that missed analyst expectations. The company also announced a significant increase in capital expenditures, including an additional $15 billion in fiscal 2026. These developments sent its shares plunging by over 11% in premarket trading, marking its worst performance in more than 24 years according to Bloomberg.

How Markets Reacted

The broader market response was mixed. While the Fed's rate cut brought some relief, Oracle's poor performance overshadowed the news. The pan-European Stoxx 600 dipped 0.3% in early trading as investors grappled with the uncertainty. Regional bourses in London and France also fell slightly, with technology stocks dropping nearly 1%.

In contrast, industrial production in Sweden rose by 5.9% year-on-year in October, and Norway recorded a current account surplus of NOK 174.5 billion in Q3. These positive economic indicators provided some support to European markets. However, the focus remained on Oracle and the implications for AI-driven spending.

In the U.S., the Nasdaq 100 futures dropped 0.8% in early trading, reflecting broader uncertainty. The selloff in tech stocks extended to related industries, with shares of companies like SAP and Nvidia also falling. Investors appeared to question whether the heavy investments in AI infrastructure would yield sufficient returns in the near term.

What Analysts Are Watching

Market analysts are now closely monitoring how Oracle's performance affects the broader technology sector. Florian Ielpo, head of macro at Lombard Odier Investment Managers, noted that the Fed's message and Oracle's reaction have opened the door for a broader diversification of equity investments. He suggested that investors are beginning to look beyond U.S. megacap stocks to opportunities in Europe and other regions.

However, the volatility raises concerns about the sustainability of current valuations. Oracle's capital expenditure increase and weaker revenue figures have sparked discussions about whether the AI boom is leading to overinvestment. Jacob Bourne, an analyst at Emarketer, warned that Oracle faces growing scrutiny over its debt-fueled data center expansion and the risks tied to AI spending.

Investors are also keeping an eye on the Fed's future moves. The central bank's recent rate cut was accompanied by a signal that further easing will depend on economic data. The fractured vote within the FOMC, where one official favored a larger cut and two wanted no cuts at all, suggests that policymakers remain divided.

Risks to the Outlook

The immediate risk for markets is a prolonged reassessment of tech valuations. Oracle's results have led to a wider selloff, with AI-related stocks like Nvidia and CoreWeave also falling. The Nasdaq 100 futures dropped 0.8% in early trading, reflecting broader uncertainty.

Beyond the U.S., European markets may see a shift in momentum if the selloff in tech continues. The Stoxx 600 is less than 1% away from its November peak, but seasonal trends typically favor a year-end rally. With December historically averaging a 1.5% gain over the past five years, investors may still see a rebound before the year ends.

On the other hand, if Oracle's challenges signal a broader slowdown in AI spending, the ripple effects could extend beyond the technology sector. Companies with exposure to cloud infrastructure or AI development will likely face increased scrutiny. Oracle's credit risk has already risen, with the cost of protecting its debt against default hitting a 16-year high according to Bloomberg.

What This Means for Investors

For investors, the current environment demands a careful balance between optimism and caution. The rotation into economic-linked sectors suggests that markets are beginning to price in a more diversified path for growth. This shift may offer opportunities in regions like Europe, where industrial and financial stocks are outperforming.

However, the tech sector remains a key battleground. Oracle's results underscore the challenges of converting massive capital outlays into profitable returns. The company's $523 billion backlog of signed contracts offers long-term visibility, but the near-term risks are clear. Investors who remain bullish on AI must weigh the potential rewards against the growing concerns about profitability and debt.

Meanwhile, companies like Drax Group are presenting a different narrative. The U.K. power generation firm raised its earnings guidance and reported strong performance in 2025, with plans to expand into flexible generation and data center infrastructure. Such developments highlight the diversity of opportunities across global markets.

As the year draws to a close, investors will be watching closely for signals that the AI-driven market correction is stabilizing. For now, the key is to remain agile, prepared to shift allocations as new data emerges.