European stocks are attracting increasing attention from global investors, amid improving earnings, recovering economic data and a broadening market base, reinforcing expectations of a continued rally, according to Bloomberg.
The Stoxx Europe 600 index rose in every session last week, its longest winning streak since June. The benchmark index gained 11% in 2026, while Germany's DAX, France's CAC 40, and Italy's FTSE MIB all hit new record highs.
European corporate profits rose by 17%, the strongest growth in four years, while regional economic momentum reached its highest level since March 2023.
Helen Jewell, chief international investment officer at BlackRock Inc. for core equities, said: There is clear enthusiasm for Europe, noting that economic resilience and demand have exceeded market expectations.
Investor positions have undergone a sharp shift; a survey by Bank of America revealed that a net 2% of fund managers now have net overweights in European stocks, compared to a net underweight of 15% in June.
The rally has also broadened beyond a small group of companies, with about 75% of the Stoxx 600 index's constituents trading above their 200-day moving averages, approaching the highest percentage recorded in the past decade outside of major post-crisis recovery periods.
Easing tensions between Washington and Tehran has improved market sentiment, while lower oil prices since July have eased inflation concerns. However, uncertainty surrounding the full reopening of the Strait of Hormuz remains a risk.
Artificial intelligence is another key driver, with shares of ASML and Infineon Technologies rising more than 60% this year, as investors seek exposure to the semiconductor sector.
Shares of companies expected to improve their margins through the adoption of artificial intelligence also advanced; an index comprising ABB, Standard Chartered and E.On gained 14%, compared to a rise of only 3% among major US cloud computing companies.
European bank stocks rose 22% as investors sought alternatives to volatile US technology stocks.
The Stoxx 600 is currently trading at 15 times forward earnings, its lowest discount to the S&P 500 in four years. The prospect of a Federal Reserve interest rate hike, coupled with uncertainty surrounding the long-term outlook for European growth, remains a key risk.
