European stock markets are rallying strongly, with the Stoxx Europe 600 posting consecutive daily gains for a full week, its longest streak since June. European corporate earnings have grown 17% year-to-date, the strongest expansion in four years, while economic momentum is at its highest since March 2023. Regional benchmarks including Germany’s DAX, France’s CAC 40 and Italy’s FTSE MIB have hit all-time highs, with European semiconductor stocks like ASML and Infineon surging more than 60% year-to-date. The Stoxx 600 now trades at 15 times forward earnings, the narrowest valuation discount to the S&P 500 in four years. Investor sentiment is shifting markedly, with fund managers moving from 15% underweight in June to a net 2% overweight position, though geopolitical risks and potential Federal Reserve rate hikes remain headwinds.
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