European equities surge as earnings, AI bets and fund sentiment boost Stoxx 600

European stocks rallied all week, with the Stoxx 600 posting its longest daily gain streak since June and attracting more overweight positions from fund managers.

European equity markets have entered a robust phase, with the Stoxx Europe 600 climbing daily throughout the past week—the longest uninterrupted rise since June. Strong earnings growth of 17% and the best economic momentum since March 2023 are underpinning the rally, prompting BlackRock’s Helen Jewell to cite surprising resilience and UBS’s Mark Haefele to recommend adding exposure. Fund-manager sentiment has turned, with a Bank of America poll indicating a net 2% overweight stance versus 15% underweight in June, and Citigroup noting improved risk appetite.

AI-focused companies such as ASML and Infineon have surged over 60% this year, while a Bank of America basket of European AI adopters rose 14%, outpacing US peers. Traditional sectors like banks and industrials also performed strongly, with the Stoxx 600 Banks index up 22%, and the overall index now trades at 15 times forward earnings, the narrowest discount to the S&P 500 in four years. Some analysts remain cautious about long-term growth, but the overall direction remains positive.