Europe’s hot stock markets are creating a buzz among investors

Europe’s stock market is having a real run, and the people putting money to work there are starting to sound unusually confident. The Stoxx Europe 600 rose every day last week, its longest winning streak since June, and major regional indexes in Germany, France and Italy have all pushed to record highs.

That isn’t just price momentum talking. The case for Europe is being built on better earnings, firmer growth, and a sharp turn in sentiment. Europe Inc. is reporting its best earnings growth in four years, at 17%, while the region’s economic momentum is said to be the strongest since March 2023. Helen Jewell of BlackRock said demand has stayed stronger than expected, and UBS’s Mark Haefele argued it may be time to add to European equities.

Fund managers have clearly noticed. Bank of America’s latest survey showed a net 2% of managers overweight European stocks, a swing from 15% underweight in June. Citi also found Europe was the only major region with a meaningful improvement in risk appetite in the final week of July. That kind of shift matters when markets are already running hot.

The rally is also broadening out. About 75% of Stoxx 600 members now trade above their 200-day moving average, close to the top of the past decade’s range. Signs of easing tensions between Washington and Tehran helped sentiment too, while oil’s pullback from its July peak has taken some pressure off inflation fears. There are still worries about the Strait of Hormuz, but the mood has improved enough that more investors seem willing to look past them.

AI has become part of the story as well, though not in the usual way. Investors are moving beyond the biggest spenders and looking for European companies that benefit from AI investment or use it to improve margins. Semiconductor names such as ASML Holding NV and Infineon Technologies AG are both up more than 60% in 2026, while a Bank of America basket of European AI adopters has gained 14%, beating the 3% rise in US hyperscalers. Banks have joined the party too, with the Stoxx 600 Banks index up 22% this year.

Europe still looks cheap relative to the US, but not as cheap as it did. The Stoxx 600 trades at 15 times forward earnings, the smallest discount to the S&P 500 in four years. Some investors still doubt Europe’s longer-term growth story, and Fed rate hikes could spoil the mood. Even so, the argument in favor of the region is getting harder to dismiss: negative positioning, improving sentiment, and better-than-feared fundamentals all at once.