European stock markets continued their upward momentum this week, with the DAX hitting new highs, driven by expectations of looser monetary policies and strong corporate earnings reports.
The broader European market performance outpaced US markets, fueled by optimism surrounding the European Central Bank’s potential for more accommodative policies compared to the Federal Reserve.
Global markets are set to close the week on a positive note, buoyed by easing inflation and solid corporate earnings. The US dollar pulled back from a two-year peak, benefiting other currencies and boosting metal prices. Meanwhile, global government bond yields fell, supported by lower-than-expected inflation data from the US and the UK. Sentiment remained optimistic ahead of key events, including Donald Trump’s upcoming inauguration and the release of major corporate earnings.
European benchmarks posted weekly gains, with the pan-European Stoxx 600 rising 0.81%, the DAX up 2.18%, the CAC 40 increasing 2.74%, and the FTSE 100 climbing 1.74%. The Euro Stoxx 600 is now only 1.5% below its all-time high of €528 from September 2024. The DAX’s performance was particularly notable, with the index hitting fresh highs, supported by strong sector-wide gains. The French market also saw significant growth, bolstered by luxury goods stocks.
Across sectors, most saw positive weekly movements, led by consumer cyclicals, technology, and financials, each rising by over 2%. Luxury stocks, in particular, surged after Richemont reported strong quarterly earnings, with shares climbing 16%, boosting competitors like LVMH (up 7.33%), Hermès (up 4.33%), and Kering (up 3.63%). The Euro Stoxx 600 Luxury 10 Index rose 6.8% for the week. Technology stocks also rallied on hopes of supportive central bank policies, with ASML and SAP rising 3.9% and 4.2%, respectively.
The banking sector benefited from positive earnings reports from US banks, with HSBC shares jumping 3% to their highest level since 2007 after Bloomberg reported restructuring efforts, including cuts to bonuses. BNP Paribas and UBS also posted gains of 4.4% and 1.7%, respectively.
Energy stocks extended their gains, driven by rising energy prices. BP’s announcement of a 5% workforce reduction (about 4,700 jobs) as part of cost-cutting measures led to a 2.3% weekly increase in its shares.
On the economic front, Germany’s economy contracted by 0.2% in 2024, marking its second consecutive year of decline. However, UK markets saw some relief as December inflation came in lower than expected, contributing to a sharp drop in gilt yields after they had reached a decade-high the previous week.
