US tech stock correction likely, warn ECB economists - Financial Times

European Central Bank economists have flagged the possibility of a correction in US technology stocks, according to the Financial Times. The warning reflects concern that valuations in the sector may have run ahead of fundamentals after a prolonged rally.

For markets, the significance lies in the concentration of US equity indices in a handful of large technology names. A sharp reversal in those stocks could weigh on broader benchmarks and spill over into global markets, given the sector's outsized role in driving recent returns. The ECB's commentary also touches on financial stability: a tech-led selloff could tighten financial conditions and interact with other vulnerabilities.

What to watch: whether valuation measures for major tech companies continue to stretch relative to earnings; how concentrated index exposure remains; and whether any pullback stays orderly or becomes disorderly. Investors may also monitor whether the warning is echoed by other central banks or regulators. For now, the ECB's view is a risk assessment, not a forecast of timing or magnitude.