European equity markets are entering the second half of 2026 with a stronger earnings backdrop and broader signs of corporate momentum. A technology-led advance during the second quarter lifted valuations across the region, while expectations for the strongest profit growth in several years have created a more constructive setting for the coming reporting season.
The Morningstar Europe Index gained more than 10% in dollar terms during the second quarter, recording its strongest quarterly rise since late 2020. Although gains in the United States and Asia were larger, Europe’s performance reflected renewed interest in companies positioned to benefit from artificial intelligence, digital infrastructure and long-term capital investment.
Europe’s technology sector rose by almost 40% during the quarter as demand strengthened for semiconductor manufacturers, equipment suppliers and communications businesses linked to artificial intelligence investment. Infineon Technologies more than doubled, while ASML advanced by about 45%. Nokia and Siemens also delivered substantial gains, showing that the opportunity extended beyond chip production into industrial technology and network infrastructure.
The advance was supported by other major sectors. Financial shares gained close to 20%, while industrial companies rose by around 14%. This broader participation suggests that confidence was not limited to a narrow group of technology businesses. Banks, manufacturers and infrastructure-related companies also benefited from improving expectations, helping to create a more balanced regional market.
Performance varied across individual countries. The Netherlands led the major European markets, supported by the significant weighting of ASML in its domestic index. Italy and Spain also recorded strong gains, while France and Germany delivered more moderate progress. These differences largely reflected market composition, with technology, financial and industrial exposure shaping national performance.
European earnings are expected to grow by about 12% compared with the same period last year. More favourable analyst revisions have raised the possibility that growth could reach approximately 14%, which would mark a meaningful improvement after a prolonged period of limited profit expansion.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
