As volatility in artificial intelligence (AI)-related stocks, particularly in the United States, has increased, there has been a significant shift of funds toward European markets. Analysts note that, following strong second-quarter results, European stocks are gaining traction as a diversification strategy.
According to the Financial Times and Bloomberg News on August 9 (local time), the Stoxx Europe 600 Index rose for five consecutive trading days from August 3, marking the longest winning streak since June. On August 7, the index closed at 660.25, reaching an all-time high. Other major European indexes—including Germany’s DAX, the UK’s FTSE 100, France’s CAC 40, and Spain’s IBEX—also hit historic highs in succession. Notably, monthly net inflows into European equity exchange-traded funds (ETFs) in July turned positive. This is the first net inflow since late February, when the conflict between the United States and Iran began.
Stronger corporate earnings have been cited as the main driver behind this rally. The Financial Times, referring to FactSet data, projected that earnings for European companies in the second quarter of this year will increase by 22% compared to the same period last year—the highest growth rate since 2022. Marina Zavolok, European Equity Strategist at Morgan Stanley, described this earnings season as “remarkably strong,” noting that “almost every sector has reported positive results.” Helen Jewell, International Chief Investment Officer of Fundamental Equities at BlackRock, stated, “Investor interest in European equities is clearly on the rise,” adding, “Europe’s resilience has exceeded market expectations, and investment demand is much stronger than anticipated.”
Some analysts point out that capital is flowing into European stocks as investors seek to diversify away from AI-focused names. Vita Mantei, Head of European Equity Strategy at Citi, explained, “Investing in Europe can be seen as an ‘anti-AI trade,’ and overseas investors have started to favor European equities again.” She added, “Investors are likely to continue holding technology stocks while adding cyclical stocks to their portfolios, thereby diversifying their investments, which will be positive for European equities.”
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There is also an outlook that easing tensions in the Middle East will help relieve inflationary and economic pressures on Europe, which relies heavily on energy imports. Mantei noted that Europe’s ability to avoid the worst economic scenario from rising energy prices appears to be the result of these eased tensions, and that such changes have encouraged the inflow of funds into European markets.
This content was produced with the assistance of AI translation services.
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