European STOXX 600 Hits Record High as Rally Broadens Beyond Tech

On July 3 2026 STOXX 600 reached 652.35, closing 0.7 % up—strongest weekly gain since mid-May. Germany’s DAX set a record, ending 0.8 % higher. Cyclical stocks and a 0.7 % rise in defence shares after Russia’s deadliest strike on Ukraine drove rally.

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Cyclical groups—industrials, banks and financial services—outperformed, widening a rally that had been tech-focused. Semiconductor firms posted gains: Siemens up 2.6 % after a Kepler Cheuvreux upgrade, Aixtron +6 %, Soitec +5 % and BE Semiconductor +4.2 %. Expectations that U.S. Fed will delay its next rate hike, supported by a jobs report, boosted the market.

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June euro-area inflation eased slower than expected, prompting ECB President Christine Lagarde to say risk balances are “more balanced.” Jefferies economist Modupe Adegbembo noted a “noticeably less hawkish” tone, though inflation fight is not over. Traders price a 23-basis-point ECB tightening this year (LSEG). Defence stocks rose as Russia intensified attacks on Ukraine, raising expectations of higher defence spending.

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• David Morrison, Analyst, Trade Nation – highlighted cheap valuations of “tech-lite” European stocks.

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• Modupe Adegbembo, Jefferies economist – noted ECB’s softer stance.

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• Kepler Cheuvreux – upgraded Siemens, supporting the DAX.

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• German government – projected 2027 borrowing over €203 billion, up from €196.5 billion.

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Morrison stressed the lower valuation of European equities versus U.S. peers. Adegbembo underscored the ECB’s comfort with inflation trends. LSEG data showed expectations for ECB rate hikes, and German finance ministry’s draft budget signaled a sovereign borrowing plan for 2027.

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The source material did not present criticism of the rally. No dissenting viewpoints were reported regarding the market’s valuation or policy expectations.

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All sources concur on the index’s performance and the macro-economic backdrop. However, precise estimates of how much defence-sector earnings will rise from the Ukraine conflict remain unspecified.

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• “The tech-lite European indices are back in demand, even more so given that the stocks within them trade on much lower (valuation) than those seen over in the U.S.,” — David Morrison, Analyst, Trade Nation

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• “So, not only are Europe's indices less exposed to the AI trade, but they are also relatively cheap.” — David Morrison, Analyst, Trade Nation

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• “Compared with June, policymakers sounded noticeably less hawkish... The message was not that the inflation battle has been won, but rather that central banks are becoming increasingly comfortable with the direction of travel,” — Modupe Adegbembo, Economist, Jefferies

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• “Traders now see the ECB hiking rates by a total of 23 basis points this year, LSEG data showed.” — LSEG data

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Thin trading is expected on U.S. public holiday, limiting volume. Market participants will watch for ECB policy signals, rate-path developments, and escalation in the Ukraine conflict that could reignite defence-sector momentum.

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