Europe's STOXX 600 index achieved its fourth consecutive record closing on Friday, with the benchmark closing 0.3% higher at 660.25 points. According to reports from Reuters, the pan-European index marked a fourth consecutive weekly advance, driven primarily by technology stocks that mirrored strong Wall Street performance. The rally was supported by a largely positive slate of corporate earnings and expectations of a potential U.S.-Iran agreement throughout the week. As reported by Investing.com, European equities ended higher on Friday to post their best weekly performance since late June, with most major indexes across the continent seeing solid gains. The Economic Times reports that the Stoxx Europe 600 Index gained every day last week in its longest streak since June, reflecting a major shift in European stock market fundamentals.
Technology shares emerged as the best performing sector on the STOXX 600 this week, adding 1.9% in Friday's session. As reported by Reuters, this sector performance mirrored gains from Wall Street and contributed significantly to the overall market rally. The technology sector's strong showing reflects investor confidence in the sector's growth prospects and its ability to drive market performance across European markets. According to Investing.com, the risk-on sentiment effectively overshadowed resurfacing geopolitical concerns in the Middle East, with traders showing earlier caution following reports that Iranian lawmakers are evaluating a bill to bar U.S. and Israeli vessels from transiting the Strait of Hormuz. The Economic Times notes that the gains are being driven by a broader swath of stocks, with about 75% of the Stoxx 600's constituents trading above their 200-day moving average, near the top of the range of the past decade.
Companies in the STOXX 600 are now expected to report second-quarter earnings growth of more than 22%, representing the strongest growth since the third quarter of 2022, according to data compiled by LSEG. According to Reuters, healthcare stocks rose 1.2%, with Genmab jumping 6.5% after the cancer drugmaker reported higher first-half revenue and raised its full-year outlook. Novo Nordisk and Abivax gained 3.9% and 3.5% respectively, demonstrating the broad-based strength in corporate earnings across multiple sectors. As reported by Investing.com, Genmab jumped nearly 10% after the Danish biotech firm boosted its full-year revenue and profit guidance, dragging peer healthcare heavyweights up between 3% and 5%. Kingspan surged 15.8% after raising its full-year profit outlook, citing unrelenting structural demand for energy-efficient data center insulation linked to the artificial intelligence boom. The Economic Times reports that Europe Inc. is reporting its best earnings growth in four years at 17%, with the strongest economic momentum since March 2023, underpinning this sustained rally.
Investors parsed the U.S. nonfarm payrolls report that showed the world's largest economy unexpectedly shed 23,000 jobs in July, falling far short of consensus expectations for an 85,000 gain. According to Reuters, Michael Hewson, senior market analyst at iForex, noted that "all today's payrolls number has done is basically given it an extra boost" to the European market rally. The softer U.S. jobs data has diminished expectations for aggressive monetary policy tightening, with money markets moving towards pricing in a longer pause rather than the nearly even chance of a 25-basis-point rate hike at the Fed's September 16 meeting. As reported by Investing.com, the weak labor reading triggered a swift unwind of hawkish Fed bets, with sovereign bond yields falling globally providing a fresh liquidity tailwind for equity desks. The Economic Times notes that the weak labor reading has triggered a swift unwind of hawkish Fed bets, with money managers increasingly optimistic about this rally being more durable than just another short-term trade.
According to Gordon Kerr, European macro strategist at KBRA, quoted by Reuters, "Overall, the reporting season reinforces the view that European corporate fundamentals remain healthy, particularly among higher-quality investment-grade issuers." However, he added that "markets are becoming increasingly selective as elevated valuations leave less room for disappointment." The Economic Times reports that Helen Jewell, international chief investment officer for fundamental equities at BlackRock, said "There is definite excitement about Europe. The region's resilience has surprised the market and demand remains a lot firmer than had been expected." Mark Haefele, chief investment officer at UBS Global Wealth Management, noted that "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." The latest Bank of America Corp. survey showed a net 2% of fund managers are now overweight European equities, compared with 15% who were underweight in June. A Citigroup analysis found Europe was the only major region to enjoy a meaningful improvement in risk appetite in the final week of July, setting up equity indexes to extend a record-breaking run in the second half of 2026.
