The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 17, 2025. REUTERS/staff

By Johann M Cherian and Anastasiia Kozlova

(Reuters) -European shares fell on Monday, with those in Germany near a five-month low as a broad risk-off mood gripped global markets, sparked by worries about an overvalued tech sector and diminishing prospects of an imminent interest rate cut from the U.S. Federal Reserve.

The pan-European STOXX 600 dropped 1.3% to 564.4 points by 0938 GMT, its lowest since November 7. Major regional bourses such as Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> fell around 1.3% each.

Investor sentiment globally has been fragile, with expectations high for Nvidia <NVDA.O> to deliver standout results on Wednesday.

In Europe, AI equipment makers including Siemens Energy lost 3.1% and Schneider Electric fell 1.4%, while ABB's shares dropped 4.2% after the company reaffirmed its top-line growth forecasts, disappointing investors.

Nvidia, with its dominance in AI chips, has become the bellwether for the trend which has sparked gains in tech and infrastructure stocks across the globe. However, the worry is that the AI rally has made related sectors overvalued.

"This is simply an overdue period of volatility that has caught investors out. You're still in the phase where people aren't choosy about what they're selling and it hits some harder than others," said Chris Beauchamp, chief market analyst at IG Markets.

Losses were across the board, with banking stocks down over 2% each and were the biggest drags on the index, while miners were top sectoral decliners with a 2.3% fall.

Reflecting investor nervousness, a volatility gauge jumped 2.2 points to 22.4, its highest level since the U.S. regional bank sell-off in mid-October.

Traders are also cautious ahead of the long-delayed U.S. jobs report due on Thursday.

While private surveys have pointed to a softening labour market, hawkish remarks from most Fed policymakers have dampened expectations of an interest rate cut in December.

"In our view, the chances of a strong year-end rally have diminished. Conversely, it seems as if market participants should focus more closely once again on the long list of risks," Metzler said.

European healthcare stocks were single winners, helped by a 6.4% rise in Roche, which published late-stage trial results for its breast cancer pill, giredestrant.

Among others, Rheinmetall jumped 3% after the defence company said it was aiming for sales of around 50 billion euros ($58.01 billion) and an operating margin of more than 20% by 2030.

(Reporting by Anastasiia Kozlova in Gdansk and Johann M Cherian in Bengaluru; Editing by Mrigank Dhaniwala and Maju Samuel)