European equities are on track this week for their biggest outperformance versus the S&P 500 since April 2025, as investors pulled back from artificial intelligence trades and a set of solid corporate earnings lifted the region's markets.
The Stoxx Europe 600 index closed 0.7% higher on Friday, led by food and beverage shares and automakers. Healthcare stocks were the biggest laggards.
On Friday, cooling expectations for a Federal Reserve rate hike this month also supported overall market sentiment. Fed Chair Kevin Warsh, speaking during the International Monetary Fund's annual meetings in Bangkok, did not address monetary policy or offer his views on the US economic outlook. Investors pared back bets on a Fed rate hike at the October 27-28 policy meeting.
European stocks rose 2.1% this week, with defensive sectors drawing support as volatility intensified in AI-related names. Beyond corporate earnings, investors are still watching elevated energy prices stemming from the Iran war and the outlook for central bank policy.
Guillermo Hernandez Sampere, head of trading at MPPM, said: "Despite pressure from geopolitical risks and rising inflation, eurozone economic data are still providing support to the market. At the same time, the market is also watching the bond market, because yields in some eurozone countries may continue to climb, putting further pressure on the euro and the European Central Bank."
Among individual stocks, wind turbine maker Nordex SE surged 12% after third-quarter results far exceeded expectations and the company raised its full-year margin target. Commerzbank shares gained 0.5% after UniCredit received ECB approval to increase its stake in the bank, paving the way for Chief Executive Andrea Orcel to pursue a takeover of the German lender. Some UK bank shares fell after reports that Chancellor John Healey would raise the bank tax in this month's budget. NatWest and Lloyds both dropped about 1%.
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