European shares climbed on Friday and closed out their best week since June, with the pan-European STOXX 600 index rising 0.7% to 644.74 points, touching the highest level in over three weeks. According to The Economic Times, the benchmark was up more than 2% for the week, marking a significant recovery from recent volatility. The strong performance was driven by robust corporate earnings across multiple sectors, which provided a crucial buffer against a global selloff in technology stocks. As per Capital.com senior market analyst Daniela Hathorn, "This week has demonstrated the value of diversification when the concentrated US technology trade comes under pressure."
The technology sector displayed notable stability despite earlier concerns over increased reliance on debt to develop AI infrastructure and competition from China. ASML Holding and Aixtron both gained 6% after reporting third-quarter order intake above market expectations and reaffirming their annual guidance. Ericsson also contributed positively to the sector's performance. However, the tech sector remained flat for the week as investors weighed the mixed signals from the AI infrastructure debate. The sector's resilience helped offset earlier weakness and contributed significantly to the overall market recovery.
Industrial stocks led the gains, rising 0.7% as investors welcomed upbeat earnings and improved corporate outlooks. Schneider Electric shares reversed earlier gains and were last down 1.8% after the industrial group raised its 2026 core profit and revenue targets for the second time, signalling confidence in its business prospects. However, the stock's performance on Friday contrasted with earlier gains. Airbus gained 1.5% after securing an order for 75 A320neo Family aircraft from Aviation Capital Group. Alstom rose 1.8% after signing a 15-year extension to its train services agreement with Greater Anglia for the operator's Class 720 Aventra fleet. The industrial sector's strong performance helped offset some of the earlier weakness in technology stocks.
Nordex soared 12.3% after the onshore wind turbine maker posted a better-than-expected third-quarter core profit and lifted its full-year margin forecast. Nestle gained 1.7% after JPMorgan upgraded the Swiss food and drinks group to an "overweight" rating, propping up the food and beverage index which rose 1.4%. The healthcare sector eased 0.3% after gaining more than 4.6% over the previous two sessions. Porsche shares added 2% after the German sports car manufacturer unveiled the Mission S vision model, showcasing the future evolution of its design identity under the 'Sportwagenschmiede' 35' strategy. The banking sector emerged as one of the biggest gainers, with ING rising 1.7% and Intesa Sanpaolo gaining 0.8%, while some major European companies faced pressure.
The euro zone's final HICP inflation reading for September came in at 3.8% year-on-year, in line with economists' expectations but well above the European Central Bank's 2% target, showing price pressures still need to be tamed. The ECB has raised borrowing rates by 50 basis points in 2026 to 2.50% to curb price pressures stemming from higher oil prices. According to LSEG data, earnings for STOXX 600 companies are expected to rise 20.7% in the third quarter from a year earlier, slightly down from the 21% growth forecast last week. Investors are already pricing in another quarter-point rate hike at a December meeting, with SAP, ABB and Barclays among the firms due to report results next week. The latest inflation figures helped investors assess whether energy-related price pressures are easing, while strong earnings results are expected to boost investor sentiment and potentially move markets back to recent highs.
