Europe is once again appealing to investors
Summary
- European stock markets have regained investor interest in August, with the Stoxx 600 index nearing record highs and significant inflows into European shares.
- The Stoxx 600 index companies are expected to report a 24.1% earnings growth in Q2, marking the strongest growth rate in nearly four years, while European shares have risen around 10% this year.
- Valuation levels in Europe remain lower than in the US, with the Stoxx 600's forward P/E ratio at 15x compared to the S&P 500's 20x, offering diversification benefits.
- Economic indicators support positive sentiment, with the Eurozone's composite PMI rising to 52.1 in August, indicating broad-based growth, except for France, which remains in contraction.
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Automatic translation: Originally published in Finnish 24/08/2026, 00:33 GMT. Give feedback here.
Last week was volatile for European and US stock markets. Helsinki saw gains, but Europe and the US broadly experienced declines. Despite the down week, it appears European stock markets have returned to favor with investors in August.
| Indices | closing | change 1 week | year to date | |
| OMX Helsinki | 13549,1 | 0,3 % | 9,1 % | |
| Eurostoxx 600 | 654,2 | -0,6 % | 10,5 % | |
| S&P500 | 7674,3 | -1,4 % | 12,1 % |
Forward P/E ratios in the United States and Europe
Source: LSEG
The Stoxx 600 index is near its record highs, earnings growth has exceeded expectations, and the euro has strengthened to a three-month high against the dollar. According to Reuters, 2.44 BUSD flowed into European shares the week before last, which was the largest weekly inflow since the end of February, before the outbreak of the conflict between the US and Iran. This marks a clear turnaround compared to March, when the war cooled the "Make Europe Great Again" thesis due to fears of an energy shock.
Reuters also reported that Stoxx 600 index companies were expected to report earnings growth of 24.1% in Q2, the strongest growth rate in nearly four years. European shares have risen by of around 10% this year, slightly less than the S&P 500 index. Valuation levels remain clearly lower than in the US: the Stoxx 600's P/E ratio for the next 12 months is 15x, which is a clear markdown compared to the S&P 500, which trades at 20x. The AI hype creates a difference in multiples, which on the other hand means that Europe also offers diversification benefits.
EZ: Composite purchasing managers' index
Economic surprises
Source: LSEG
Real economy figures have also supported the positive sentiment. Economic surprises have been clearly positive recently, and S&P Global's composite Purchasing Managers' Index for the Eurozone rose to 52.1 in August, indicating strengthening growth. The recovery was relatively broad-based: in Germany, the manufacturing PMI showed the strongest growth in 51 months, although activity in the services sector decreased. Growth was also seen in Italy and Spain. France, which suffered from heatwaves, was the only major economy to remain in contraction.
