European stocks slip on AI safety pause, Fed rate bets weigh on sentiment

European equities experienced a decline on Monday morning as a combination of factors weighed on market sentiment ahead of major central bank decisions. The pan-European STOXX 600 index remained flat, with investors adopting a defensive posture. Germany's DAX and France's CAC 40 both ended lower, while London's FTSE 100 saw a modest gain.

The decline in European equities was primarily driven by concerns surrounding AI safety and the Federal Reserve's potential rate hike. Shares in AI-linked technology companies, such as those led by OpenAI and Anthropic, fell after the industry leaders called for a temporary pause in advanced AI model development. Additionally, semiconductor suppliers and other rate-sensitive sectors faced pressure following the warnings from industry experts.

Oil prices continued their upward trend, with Brent crude futures surging another 3% to approach $112 a barrel. This increase came amid ongoing military strikes in Saudi Arabia, which have disrupted oil production and transportation. Yemen's Houthi rebels also posed a threat to Red Sea transit routes, potentially exacerbating supply disruptions.

Inflation concerns added to the market's unease, as global financial markets prepared for a series of monetary policy decisions. The U.S. Federal Reserve, the Bank of Japan, and the Bank of England were all expected to raise interest rates in the coming weeks, with the likelihood of additional rate hikes reaching 86% for the Fed at its Sept. 15-16 meeting.