European equities rallied broadly on Friday, propelled by a global rebound in technology stocks and renewed investor optimism toward artificial intelligence (AI), driving the pan-European STOXX 600 Index to an intraday record high and positioning it for a fourth consecutive monthly gain—capping off an already resilient July performance on a strong note.
Zhitong Finance APP reported that European equities rose broadly on Friday, propelled by a global rebound in technology stocks and renewed investor optimism toward artificial intelligence (AI). The pan-European STOXX 600 Index hit an intraday record high, positioning it for a fourth consecutive monthly gain and capping a resilient July performance on a strong note.
As of the morning trading session, the STOXX 600 Index advanced nearly 1%, briefly touching a record high of 656.67 points, extending its cumulative gain for July to over 2%. Major national indices all posted gains: Germany's DAX and Italy's FTSE MIB each climbed approximately 1%, France's CAC 40 rose 0.9%, and the UK's FTSE 100 gained 0.8%.
Renewed AI Optimism Fuels Tech-Led Rebound
The core driver behind this rally is the rapid restoration of confidence across the global AI supply chain. Europe’s technology sector surged more than 2% at one point, seamlessly building on the prior night’s strength in U.S. equities and a surge in Asian semiconductor stocks.
Due to$Microsoft (MSFT.US)$and$Amazon (AMZN.US)$the release of better-than-expected quarterly results and a robust outlook for capital expenditures, market concerns over the AI sector’s perceived ‘bottomless money-burning pit’ and valuation bubbles have been significantly alleviated. Bolstered by this sentiment, South Korean $SK Hynix (000660.KR)$ stocks surged to hit the 30% daily trading limit, driven by strong performance in the memory market,$Samsung Electronics (005930.KR)$with gains reaching approximately 27%, while the KOSPI index posted an unusually sharp rise of about 18%.
In European markets, French semiconductor materials supplier$SOITEC S.A. (SLOIF.US)$jumped 7%, chip leader$INFINEON TECHNOLOG (IFNNY.US)$soared 6%, and lithography equipment giant$ASML Holding (ASML.US)$also recorded a 3% gain.
Florian Ielpo of Lombard Odier Investment Managers stated, “The most intense phase of position unwinding is likely behind us. From a valuation perspective, I believe current levels are more reasonable than they were a month ago—though not yet cheap. This does not signal the end of the AI trade; rather, it most likely marks the conclusion of the easy phase where ‘buying blindly’ guaranteed gains.”
Earnings Season Demonstrates Resilience, with Energy Profits Driving Half the Gains
Beyond improved macro sentiment, solid corporate earnings provided a firm fundamental underpinning for European equities. According to LSEG data, second-quarter earnings expectations for European blue-chip companies have been revised upward to 20.8%, largely driven by explosive profit growth in the energy sector. Excluding energy, aggregate earnings growth is still projected at a healthy 10.3%.
Based on results from 225 companies that have already reported and market forecasts for those yet to report, revenue for STOXX 600 constituents is expected to grow by 11.7%, potentially ending a streak of four consecutive quarters of contraction. Of the ten major industry sectors, eight are forecast to deliver profit growth, with basic materials expected to post the strongest gains, while technology and financials are projected to achieve modest double-digit increases. Real estate, consumer discretionary, and healthcare are anticipated to be the weakest-performing sectors this earnings season.
At the individual stock level, Credit Agricole (CRARY.US) saw its share price surge nearly 5% after reporting second-quarter profits that exceeded market expectations; luxury sports car manufacturer$Ferrari (RACE.US)$raised its full-year profit guidance, citing strong demand for personalized custom models and exceptional pricing power, prompting an immediate rise in its share price. The Swiss National Bank also reported substantial second-quarter profits, driven by foreign exchange gains and higher equity valuations.
However, earnings performance remained markedly divergent. International Airlines Group, the parent company of British Airways, saw its shares plunge as much as 5% following a sharp decline in second-quarter profits. Siemens Healthineers (SMMNY.US) cut its full-year revenue outlook due to persistent supply chain disruptions and slowing equipment orders in key overseas markets, causing its stock to drop 3.3%. Additionally, aerospace components maker Melrose Industries (MROSY.US) announced that an incident at its California-based U.S. facility would likely incur additional costs of approximately GBP 25–30 million in the second half of 2026, sending its shares plummeting 9.3%—the worst performer among STOXX 600 constituents.
Inflationary and Geopolitical Risks Persist; Central Bank Policy Path Takes Center Stage
Amid the stock market’s robust rally, falling oil prices have provided an unexpected tailwind. With no major escalation in tensions between the U.S. and Iran and increased supply through key chokepoints, Brent crude prices have been held below USD 90 per barrel, somewhat alleviating concerns about imported inflation.
Nevertheless, macroeconomic uncertainty has not fully dissipated. Market participants are now awaiting the preliminary July consumer price index (CPI) data for the eurozone, scheduled for release later today. Earlier regional data from Germany already signaled persistent price pressures, leading economists to widely anticipate a modest uptick in overall eurozone inflation. Should the inflation reading come in stronger than expected, it could significantly disrupt market bets on the European Central Bank’s future pace of rate cuts, posing a challenge to the continued upward momentum in European equities.
Throughout July, European equities navigated significant geopolitical tensions, volatile oil prices, and ambiguous interest rate signals from major global central banks, ultimately weathering these headwinds thanks to strong second-quarter earnings. As the month draws to a close, investors are closely monitoring inflation trends and upcoming commentary from central bank officials to assess whether the four-month rally can sustain its momentum into the second half of the year.
Editor/Deng