European stock markets have climbed for a sixth consecutive week, buoyed by a mix of stronger-than-expected economic performance in Germany, favourable shifts in bond markets, and improving consumer demand. The STOXX 600 ticked higher again, reflecting deepening investor conviction in the resilience of the region’s economic foundations.
Germany delivered a significant upside surprise, revising its first-quarter GDP growth from 0.2% to 0.4%. This marks the country’s fastest expansion since late 2022 and provides compelling evidence of stabilisation in Europe’s largest economy. A surge in exports and accelerated factory output, partly driven by firms acting ahead of anticipated US tariffs, helped power the revision. Although this may pull forward some future demand, rising real wages and state-backed infrastructure programmes worth hundreds of billions of euros are expected to support continued momentum.
Bond yields across both the US and the Eurozone have begun to ease, relieving pressure on valuations and lending new life to equities. The retreat followed the resolution of a significant US fiscal bill that had temporarily lifted yields earlier in the week. For investors, lower yields improve the risk-return profile of equities and reduce borrowing costs for businesses.
The UK’s economy also flashed signs of vitality, with retail sales jumping more than 1% in April. This marks the fourth straight month of growth and reflects the gradual recovery in household confidence and spending power. The FTSE 100 responded positively, advancing on the day of the release, as investors welcomed the broader strength in consumer-facing sectors.
On a sectoral level, financials and industrials were among the top performers, with German stocks leading the charge. The DAX moved closer to record territory, supported by an upswing in domestic sentiment and renewed interest in German equity valuations. With Berlin pledging major new investment in infrastructure and defence, investor appetite is pivoting toward sectors set to benefit from this fiscal shift.
Corporate earnings across Europe have also provided reasons for optimism. Companies listed on the STOXX 600 are now forecast to deliver earnings growth of 2.3% for the first quarter, up from initial expectations of 1.9%. Over 60% of firms reporting so far have exceeded analyst forecasts. Among the standouts, AJ Bell posted a 12% year-on-year increase in profits, lifting its shares significantly. Michelin advanced following a broker upgrade, while Games Workshop underperformed slightly amid ongoing tariff uncertainty.
While some caution remains around the sustainability of these gains, particularly as markets have already priced in a robust recovery, the fundamentals are aligning in Europe’s favour. Macroeconomic strength, improving earnings, and supportive fiscal policy are now creating a virtuous cycle for investors looking to diversify beyond the US or Asia.
Europe is not just rebounding, it is repositioning. As global trade dynamics evolve and domestic demand strengthens, the continent’s markets appear increasingly well-placed to capture a new wave of capital allocation. For investors seeking exposure to quality growth and value opportunities, the case for Europe is becoming more compelling by the week.
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.
