European stocks hit record highs on strongest earnings since 2022

European equities extended a run of all-time highs last week as a surge in corporate earnings and easing tensions between the United States and Iran drew billions in fresh capital back to the region. The Stoxx Europe 600 closed at successive records, while Germany's DAX, the UK's FTSE 100, France's CAC 40, and Spain's IBEX also reached all-time peaks.upday+1

European companies delivered 22 percent year-on-year earnings growth in the second quarter of 2026, their strongest performance since 2022, according to FactSet data cited by multiple analysts. The earnings season coincided with signs of de-escalation in the Middle East, pushing oil prices below $90 a barrel and lifting a key overhang on energy-importing Europe.investing+1

Flows Reverse as Sentiment Improves

Investor positioning has shifted sharply. European equity exchange-traded funds recorded positive net flows in July for the first time since the U.S.-Iran conflict began in late February, according to Bloomberg data. BlackRock ↘ 0.54% reported $4.4 billion in inflows into its European equity products during the month.upday

A Bank of America ↘ 0.36% survey showed a net 2 percent of fund managers now overweight European equities, compared to 15 percent underweight in June. Separately, Eurozone investor confidence turned positive on Monday, with the Sentix Economic Index rising to 0.9 from -3.1 in July, marking the fourth consecutive month of improvement.bitcoinworld+2

Banks and Semiconductors Lead

Banks have been standout performers, with BNP Paribas reporting a one-third jump in quarterly profits and UBS ↘ 2.95% posting record earnings driven by trading revenues. The Stoxx banks sub-index has rallied over 21 percent this year, nearly double the broader market's 11.5 percent gain.upday

Technology stocks added further momentum, with ASML ↘ 0.19% and Infineon raising full-year revenue forecasts. Morgan Stanley's ↘ 0.89% European equity strategist Marina Zavolock described the earnings season as "standout," noting results were "really positive across almost every sector."upday

Valuation Gap Narrows

The Stoxx 600 now trades at 15 times forward earnings, its smallest discount to the S&P 500 in four years. Hugh Gimber, global market strategist at JPMorgan Asset Management ↘ 0.73%, said that if Europe achieves mid-teens earnings growth in 2026, it would support a "rotation into Europe" as investors seek diversification from volatile U.S. technology shares.upday