European markets began the week with modest but telling strength. While the overall move was measured, the underlying shifts in sector leadership point to a change in how capital is being allocated. Tech and banking stocks led gains across the Stoxx Europe 600, with technology rising over 1 % and financials not far behind. These are not speculative rotations.
Driving sentiment is a recalibration of macro risk. Softer US inflation data has strengthened the case for the Federal Reserve to begin easing, with a potential rate cut back on the table as early as March. That has filtered across to European markets, particularly as it coincides with better-than-expected corporate results. Notably, German business sentiment indicators ticked higher, reinforcing confidence that economic activity across the eurozone may be stabilising after months of strain.
Banks are benefiting from improved net interest margin expectations, while technology stocks are attracting capital on the back of durable demand for hardware and AI-linked infrastructure. Export-heavy names are also starting to see valuation support, helped by a more constructive view on global trade following an easing in US–China tensions. At the same time, defensives like healthcare and insurance continue to see steady inflows.
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