European stocks draw investors as earnings and growth strengthen

European equities are seeing a surge in global investor interest, driven by robust earnings and positive economic indicators, according to Bloomberg. The Stoxx Europe 600 Index has experienced an uninterrupted upward trend over the past week, marking its longest winning streak since June. This index has gained 11% so far in 2026, while Germany’s DAX, France’s CAC 40, and Italy’s FTSE MIB have all hit record highs.

In a more recent period, European corporate earnings have surged by 17%, the highest growth rate in four years. Simultaneously, regional economic momentum has reached its peak since March 2023. "There is definite excitement about Europe," commented Helen Jewell, BlackRock’s international chief investment officer for fundamental equities, attributing this excitement to the region's economic resilience and higher-than-expected demand.

The shift in investor sentiment towards European equities has been significant. A recent Bank of America survey revealed that only 2% of fund managers were overweight in European equities, a stark contrast to 15% who were underweight in June. This surge has not been limited to a select few companies, but rather, around 75% of Stoxx 600 constituents now trade above their 200-day moving averages, a level not seen in a decade outside of major post-crisis recoveries.

Several factors have contributed to this positive outlook. The easing of tensions between the United States and Iran has boosted investor sentiment, and the decline in oil prices since July has alleviated inflation concerns. However, uncertainty surrounding the complete reopening of the Strait of Hormuz remains a potential risk.

Artificial intelligence (AI) is another key driver of this trend. Companies like ASML and Infineon Technologies have seen more than a 60% increase this year, as investors focus on semiconductor exposure. Additionally, companies expected to benefit from AI adoption are also advancing. An investment basket containing ABB, Standard Chartered, and E.On has gained 14%, compared to a modest 3% rise among U.S. hyperscalers.

European banks have also experienced a significant gain of 22%, as investors look for alternatives to the volatile U.S. technology stocks. Currently, the Stoxx 600 trades at a price-to-earnings ratio of 15, the smallest discount to the S&P 500 in four years. Despite this positive outlook, potential Federal Reserve rate increases and concerns about Europe’s long-term growth remain key risks.