European regulator warns of market correction risk as AI valuations stay elevated

The European Securities and Markets Authority (ESMA) has warned that stretched technology valuations and heightened geopolitical tensions are increasing vulnerabilities in EU financial markets, despite their continued resilience. The EU’s financial markets regulator and supervisor said persistent inflation, weaker economic growth and heightened volatility were testing markets, while strong performance in technology and artificial intelligence-related sectors had helped restore investor optimism and valuations. ESMA said this resilience should not be mistaken for an absence of vulnerabilities, warning that the growing gap between deteriorating macro-financial…