(Bloomberg) -- European stocks lost momentum after US business activity accelerated amid a pickup in inflation that will likely keep Federal Reserve rate cuts at bay. 

The Stoxx 600 Index erased gains fueled by the exuberant reaction overnight to Nvidia Corp.’s sales forecast. In the UK, stocks dipped after Rishi Sunak called a surprise general election for July 4, when many in his Conservative Party were still counting on having months to prepare.

After a good earnings season, the uptrend is still intact for the Stoxx 600 even amid signs of overheating. For now, optimism about the promise of artificial intelligence boom is muting bears, said Lewis Grant, senior portfolio manager for global equities at Federated Hermes Ltd.

“Sentiment is key, and Nvidia’s results continue to fuel exuberance,” Grant wrote in a note. “A healthy dose of realism may be required as investors look for third or fourth order beneficiaries for AI.”

On the monetary policy front, the European Central Bank Governor Luis De Guindos said a “prudent approach” would back a 25 basis point cut in June, according to Oberösterreichische Nachrichten. 

In the US, minutes from the last FOMC meeting showed that Federal Reserve officials thought that policy was “well positioned” and noted that some were willing to tighten policy further if needed. 

Their cautious stance was vindicated by the latest report on US purchasing managers activity, which hit the highest since April 2022, topping all estimates in a Bloomberg survey of economists. Earlier, euro-area private-sector business activity reached its highest level in a year.

Among individual movers, Hargreaves Lansdown Plc soared after it rebuffed an offer for the investment platform from a group of private equity buyers. Julius Baer Group Ltd. reversed losses after the lender reported higher than expected assets under management on positive FX impact and supportive equity markets.

For more on equity markets:

  • Reality Check Looms for Rosy Growth Expectations: Taking Stock
  • M&A Watch Europe: Hargreaves Lansdown, Sabadell, BBVA, Anglo
  • Frankfurt Eyes Return to Form as IPO Pipeline Grows: ECM Watch
  • US Stock Futures Rally as Nvidia Earnings Show AI Boom Intact
  • June Too Soon?: The London Rush

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--With assistance from Michael Msika.

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