European shares muted as investors assess AI outlook; banking stocks rally

European shares were subdued at the open on Monday as investors assessed the outlook for the global artificial intelligence trade following last week's technology selloff, while banking stocks gained on merger developments and upbeat earnings.

The pan-European STOXX 600 index was largely unchanged at 648.88 points by 0810 GMT. Mining stocks led sectoral gains, rising 1.4% as precious metal prices advanced.

Banking stocks were among the biggest movers after Credit Agricole proposed merging its Italian subsidiary with Banco BPM to create a combined lender that would become Italy's third-largest bank. Banco BPM shares surged 9.4%, while Credit Agricole declined 1.4%.

UniCredit shares climbed 3.6% after the Italian lender reported a 24% year-on-year increase in third-quarter earnings, significantly exceeding market expectations. The bank also raised its full-year profit target as it prepares to play a role in shaping the future strategy of Germany's Commerzbank, whose shares advanced 2.5%.

Technology stocks remained under pressure following sharp losses last week amid concerns about the sustainability of the global AI investment boom. Shares of chip equipment makers Aixtron and ASML fluctuated between modest gains and losses as investors reassessed the sector's growth prospects.

Meanwhile, Frankfurt-listed shares of Nvidia fell 6% after a report concerning CEO Jensen Huang's alleged relationship with a Chinese businesswoman accused of passing information to Beijing brought additional scrutiny to the head of the world's leading AI chipmaker. Reuters reported that the issue had raised questions about Huang's exposure to potential foreign intelligence concerns.

In other corporate developments, Hochtief shares dropped 5.3% after majority shareholder ACS said it had not considered making a takeover offer for the German construction group.

Luxury stocks also weighed on the broader market, with LVMH and Burberry falling more than 2% each. Weak Chinese consumer demand in October added to concerns about the outlook for European luxury goods companies, which rely heavily on China as a key market.

Investors are closely monitoring developments in the AI sector, corporate dealmaking and demand trends in China for further direction in European equities.