European Equities Rally on Strong Earnings, AI Exposure and Improved Sentiment

European equity markets have posted a sustained advance in 2026, with the Stoxx Europe 600 posting its longest daily-gain streak since June and climbing roughly 11% year-to-date. Broad-based buying has pushed about three-quarters of the index’s constituents above their 200-day moving averages, a level near the top of the past decade. The rally follows the region’s best earnings growth in four years—about 17%—and the strongest economic momentum recorded since March 2023.

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Analysts cite several intertwined factors. Robust earnings have tilted risk assessments toward “beat-the-expectations” outcomes, prompting calls to add European equities. Geopolitical easing, particularly reduced tension between Washington and Tehran, has lifted sentiment that had been dampened by oil-price volatility. At the same time, investors are shifting focus toward sectors that benefit from the continent’s heavy spending on artificial-intelligence (AI) technologies. Semiconductor firms such as ASML Holding and Infineon Technologies have surged more than 60% in 2026, while a Bank of America basket of European AI adopters—including ABB, Standard Chartered and E.On—has risen 14% this year, outpacing the modest 3% gain of U.S. hyperscalers.

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• Stoxx 600 banks index: +22% YTD.

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• Valuation: the Stoxx 600 now trades at about 15 × forward earnings, the narrowest discount to the S&P 500 in four years.

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• Fund manager positioning: a recent Bank of America survey shows 2% of managers are overweight European equities, up from 15% underweight in June.

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BlackRock’s international chief investment officer for fundamental equities, Helen Jewell, notes “definite excitement” about the region’s resilience. UBS Global Wealth Management’s chief investment officer, Mark Haefele, argues that the balance of risks now favors earnings that exceed expectations, making the moment ripe for adding European stocks. Citigroup’s head of European equity strategy, Beata Manthey, links the easing of geopolitical concerns to renewed demand for regional equities and stresses that AI-related volatility keeps tech a complementary, not contradictory, trade. Edmond de Rothschild fund manager Ariane Hayate warns that any Federal Reserve rate hikes could disrupt the trajectory, though she maintains the overall direction remains positive. Daniel Murray, deputy chief investment officer at EFG Asset Management, observes that improving sentiment is correcting previously overly negative positioning.

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• “There is definite excitement about Europe,” — Helen Jewell, international chief investment officer for fundamental equities at BlackRock Inc

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• “With the balance of risks tilted to earnings beating expectations for this quarter, we think now is the time to review and potentially add to European equities,” — Mark Haefele, chief investment officer at UBS Global Wealth Management

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• “Investor sentiment was being hampered by geopolitics, but as that clears up, it will unlock more demand for regional stocks,” — Beata Manthey, head of European equity strategy at Citigroup

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• “Even if the AI momentum picks up again, investors are well aware of lingering volatility in the sector, which means tech is now a complementary rather than contradictory trade,” — Citi’s Manthey, head of European equity strategy at Citigroup

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• “You’re starting from a place where there’s negative positioning, but the sentiment is improving,” — Murray

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