European shares flat; investors brace for Nvidia results

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Nokia falls as new long-term goals disappoint

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Defence stocks fall on signs of U.S. push over Ukraine war

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UK inflation drop fuels Bank of England rate cut expectations

(Updates after markets close)

By Anastasiia Kozlova, Johann M Cherian and Tharuniyaa .

Nov 19 (Reuters) - European shares closed flat on Wednesday while investors looked ahead to a high-stakes earnings report from chipmaker Nvidia (NVDA), which could set the direction for trading in artificial intelligence-related stocks. The pan-European STOXX 600 ended flat at 561.71 points. Most other major regional indexes fell, with Germany's DAX down 0.1%, France's CAC 40 losing 0.2%, and the UK's FTSE 100 falling 0.5%. The STOXX index fell 1.7% on Tuesday, its biggest one-day drop in more than three months, on worries that the global tech rally, seen for much of the year, had turned into a potential bubble.

Nvidia's (NVDA) earnings, due after markets close on Wednesday, are seen as a litmus test for the AI-driven rally, and could either stoke or soothe investor worries about lofty valuations.

"What the market is trying to do now with Nvidia (NVDA) is get to grips with whether there's real underlying growth and profitability there, or whether the valuation has blown out and bifurcated from the fundamentals," said Michael Field, chief equity strategist at Morningstar.

"AI sentiment isn't just affecting the U.S. now, it's affecting everything." On Wednesday, European aerospace and defence stocks fell 2.3% to the lowest level since early September on signs of a fresh U.S.-led push to end the Russia-Ukraine war.

Shares in Rheinmetall, Renk, BAE Systems, Leonardo, Saab were among the biggest losers on the STOXX index, with losses ranging from 4.5% to 7.7%.

Utilities lost 1.4%, while energy sector declined 0.4%.

Conversely, tech stocks wiped out early losses to advance 0.4%.

Sage rose 1.2% after

reporting

a better-than-expected 16% rise in underlying operating profit.

Media stocks gained 2%, with Universal Music Group rising 6.2%.

Mining stocks rose 0.8%, tracking higher gold prices. Fresnillo added 5.8%.

Investors are also awaiting the U.S. labour market report, due on Thursday, at a time when Fed policymakers are divided on the central bank's monetary policy verdict next month. In the UK, inflation slowed last month for the first time since May, cementing expectations that the Bank of England could cut interest rates in December. Among individual stocks, Kering lost 4.2% after the luxury company's Chief Executive Luca de Meo said a return to growth will require reducing its reliance on struggling flagship Gucci, further scaling back its store network and chasing more synergies, according to a memo seen by Reuters.

Nokia fell 6.9% after the Finnish telecoms equipment maker's new long-term financial targets

missed

market expectations. Danish cable solutions provider NKT jumped 17.1% after reporting quarterly results and 2030 forecasts. (Reporting by Anastasiia Kozlova, Johann M Cherian, Sukriti Gupta and Tharuniyaa Lakshmi; Editing by Eileen Soreng, Sonia Cheema and Richard Chang)