As U.S. Stocks Rally, Europe May Not Be Far Behind

The S&P 500’s drive toward a record high could have Europe equities following right behind it. As such, traders may want to consider European equities as a latent move if the S&P keeps pushing to higher highs.

European equities are already making moves toward the upside as evidenced by the Stoxx Europe 600. While equities have stumbled lately on a higher-for-longer narrative, buyers are coming back in with renewed hope that central bank rate cuts will eventually happen.

“European stocks hit record high, joining their Wall Street peers, as optimism around economic growth and a potential easing of monetary policy extended last year’s rally,” reported Bloomberg. “The Stoxx Europe 600 Index climbed 0.9% to 495.71 points, topping its previous all-time peak, which it hit in January 2022.”

The big tech effect is not relegated to just U.S. stocks. European stocks are also benefiting from strength-to-strength performances from big tech companies like Nvidia, which smashed earnings expectations.

Though the European economy faces its own set of unique challenges locally, its stock market has been rallying alongside the movement of large-cap upside. Artificial intelligence (AI) has been a recurring growth theme feeding into strength for global equities. Nvidia’s outperformance confirms that notion. In fact, the AI chipmaker has been the main catalyst for sparking a global rally despite the higher-for-longer interest rate narrative percolating in the background.

“While the European economy faces headwinds on several fronts … many of the largest stocks in the index are globally facing and benefit from far broader trends,” said Lindsay James, strategist at British wealth manager Quilter in London.