European equities smashed through another record Thursday, powered by robust earnings, cooling Middle East tensions, and money rotating out of overheated AI plays in the United States and Asia.
The continent-wide STOXX 600 added 0.4% to reach 665.61 points, extending gains from the prior session’s record close. Germany’s DAX jumped 1.1% to a fresh high, with most regional benchmarks trading firmly in positive territory.
Mark Preskett, senior portfolio manager at Morningstar Wealth Europe, pointed to reduced escalation risks in Iran as a major catalyst for the global rebound in risk appetite, with Europe benefiting most. He noted that earnings resilience caught many investors off guard.
Quarterly profits for STOXX 600 companies look set to climb 25%, the strongest showing in four years, according to LSEG data. Energy firms provided much of the lift.
Industrial giant Siemens rose 4.4% after raising its growth outlook. Drugmaker Merck gained 2.5% following its third upward revision to 2026 profit guidance this year.
Europe’s lighter exposure to AI-linked names has become a competitive advantage. Investors increasingly question stretched valuations, debt-fueled spending, and potential regulatory crackdowns after Democrats swept the midterms.
As a result, defensive sectors have attracted fresh capital. Healthcare, food and beverage, travel and leisure, and retail all posted double-digit gains this quarter. Energy and chemicals continued their annual outperformance, buoyed by elevated commodity prices tied to the Iran conflict.
“The European market is home to a different set of companies, with greater exposure to consumer-facing businesses, industrials and financials, and that has driven outperformance during a period when technology stocks have taken a bath,” Preskett said.
The STOXX 600 has advanced nearly 5% this quarter, while the S&P 500 has slipped 0.4%. Societe Generale analysts found that 13 of the benchmark’s 20 sectors have beaten the index since the midterm elections.
Luxury and auto stocks remain notable laggards, each down more than 16% this year. Weak Chinese demand continues to pressure luxury brands, while automakers such as Volkswagen and Volvo face rising competition from Chinese electric-vehicle manufacturers.
Elevated government debt in France and Italy ahead of pivotal elections next year could test the durability of Europe’s record-breaking streak.
