European markets opened Monday in cautious mode, absorbing the shock of Friday's brutal US tech selloff that saw the Nasdaq crater 4.2% and the S&P 500 plunge 2.6%. The rout was driven by a toxic combination of AI/semiconductor repricing fears and rising rate expectations after stronger-than-expected US payrolls data pushed Fed rate-cut bets further out the curve. The DAX fell 0.3% and the FTSE 100 dipped 0.2% in early trade, showing relative resilience thanks to lower tech exposure and defensive sector strength. However, the underlying risk-off tone was palpable as traders questioned whether the correction would broaden beyond US growth stocks.

The dollar remained firm across the board, with EUR/USD slipping 0.2% as rate differentials widened in favor of the greenback. German Factory Orders data is expected to show a -2.2% m/m contraction later Monday, adding to concerns about European industrial momentum. Meanwhile, USD/JPY pushed higher toward 160.30, raising fresh intervention risk as the BoJ's policy divergence with the Fed becomes increasingly stark. The pound showed relative strength, with GBP/USD edging 0.1% higher on relatively hawkish BoE expectations, though sterling remains vulnerable to broader dollar strength and UK growth concerns.

Commodities traded under pressure as risk-off flows and a stronger dollar weighed. Gold fell 0.8% despite equity market turmoil, as rising real yields and Fed higher-for-longer pricing offset safe-haven demand. Oil markets extended losses, with Brent down 1.4% and WTI off 1.6% as reports of advancing Iran nuclear truce talks reduced Middle East supply-risk premium. Industrial metals weakened on tech sector concerns and China demand worries, with copper down 0.9%. Crypto markets showed mixed action — Bitcoin gained 0.94% and Ethereum rallied 1.86% as both attempted to stabilize after Friday's tech-correlated selloff, though correlation with Nasdaq remains elevated and a key risk factor.

US pre-market futures point to continued pressure at the open, with S&P 500 futures down and Nasdaq futures showing persistent weakness. The tech sector remains the epicenter of concern, with AI and semiconductor valuations under scrutiny amid rising discount rates. Traders are bracing for potential margin-call selling and systematic deleveraging if the correction deepens. The question now is whether this is a healthy pullback in overextended growth stocks or the start of a broader risk-asset repricing as rate-cut hopes fade and economic reality sets in.

The US session will be critical in determining whether Friday's tech rout was a one-day capitulation or the beginning of a deeper correction. With no major economic releases on the Monday calendar, the focus will be entirely on price action, sector rotation signals, and whether institutional buyers emerge at current levels or selling pressure accelerates. Tech sector leadership will be under the microscope — any further weakness in Magnificent 7 names could trigger systematic deleveraging and broader market contagion. Conversely, stabilization in mega-cap tech and a defensive-to-growth rotation reversal could spark a relief rally.

This week's economic calendar is packed with high-impact events that could shift the narrative. May CPI data later in the week will be crucial for Fed rate-cut pricing — any upside surprise would further push out easing expectations and add pressure to growth stocks and risk assets. Fed speakers will also be closely watched for commentary on the inflation-growth balance and the path forward for policy. Earnings season is largely complete, but any major profit warnings or guidance cuts from remaining reporters could add to growth concerns. Additionally, geopolitical developments — particularly Iran nuclear negotiations and any signs of easing Middle East tensions — will influence oil markets and risk appetite. The interplay between rate expectations, growth concerns, and valuation adjustments in the tech sector will define market direction in the days ahead.