European stocks opened at a record high. Why are they outperforming the global market?
Shares of mining companies led the gains
The pan-European Stoxx 600 index rose above its August closing record during the first hour of trading on November 5, according to Bloomberg. By 2:45 p.m. Astana time, the index had risen 0.6% to 661.5 points. Mining companies led the gains: the Stoxx 600 Basic Resources index gained 2.3%, and shares of steelmaker ArcelorMittal rose 4.4% after its operating profit exceeded expectations, Reuters notes.
Alexander Baradez, chief analyst at the brokerage firm IG, believes that both macroeconomic factors and strong results from local companies in the last quarter contributed to today’s record high on the European stock market. According to him, European stocks are currently valued “slightly below their historical averages.”
The rise in European stocks is also being driven by hopes that a Democratic majority in the U.S. Congress will be able to repeal some of Trump’s “most harmful” decisions, particularly tariffs, according to a strategist at the Swiss bank J. Safra Sarasin, Wolf von Rothberg. These hopes are “not unfounded,” Bloomberg quotes him as saying.
The market was also buoyed by the sharp drop in oil prices: Investors expect that, following the Republicans’ defeat in the U.S. midterm elections, President Donald Trump will not escalate the conflict with Iran, Reuters explains.
Investors Are Scaling Back Their Bets on AI
The European stock market has outperformed the global market since early October: during this period, the Stoxx 600 has posted higher returns than the MSCI ACWI global stock index, according to Bloomberg. The rise in European stocks is being driven by a strong earnings season and investors shifting away from AI-related stocks: money is flowing into defensive stocks in the healthcare sector and among consumer staples companies, the agency reports.
Shares of European technology companies fell on November 5: shares of ASML, a supplier of chip-making equipment, dropped 1.8%, while those of Soitec, a manufacturer of semiconductor wafers, fell 2.8%. The market fears that, following their decisive election victory, the Democrats will tighten their control over the industry, which will slow down the development of AI infrastructure in the U.S., according to Reuters.
This article was AI-translated and verified by a human editor
