European stocks closed at another record Friday, extending their strongest run in months as corporate earnings came in better than investors expected and a weak U.S. jobs report reduced fears of another near-term Federal Reserve rate increase. 

The pan-European STOXX 600 rose 0.6% to a record 660.25, finishing the week about 2% higher and marking its fourth consecutive weekly gain. Technology stocks led Friday’s advance with a 1.9% rise, while healthcare gained 1.2%. 

The rally is being supported by something more durable than sentiment.

European companies are now expected to deliver their fastest quarterly profit growth since 2022, giving investors a fundamental reason to keep buying even after indexes reached record levels.

Second-quarter earnings for STOXX 600 companies are now projected to rise 22.4% from a year earlier. Energy companies account for much of that increase, but profits excluding energy are still expected to grow 11.5%, showing that the improvement has spread into other parts of the economy. 

Basic-materials companies — including miners, steelmakers and chemical producers — are expected to post profit growth of nearly 58%. Revenue across the index is projected to rise 12.6%, the strongest pace in four years. 

That distinction matters.

A stock market can rise temporarily because investors expect lower interest rates or because money is moving out of another region. A rally supported by improving sales and profits is harder to dismiss because companies themselves are producing more cash to justify higher valuations.

Friday’s market also benefited from developments in the United States. The weaker U.S. employment report sharply reduced expectations that the Federal Reserve will raise interest rates in September. Lower expected U.S. rates can make European equities relatively more attractive while also reducing pressure on global borrowing costs. 

Individual earnings continued to drive large moves.

Kingspan surged nearly 18% after the building-materials company raised its profit forecast on booming demand from AI data centers. Danish biotech company Genmab climbed 6.5%, while Novo Nordisk gained 3.9%. 

The strength is notable because European stocks have spent years trading at substantial discounts to U.S. equities, partly because investors expected slower profit growth and weaker technology exposure.

That gap has not disappeared. But improving earnings across energy, healthcare, industrials and materials are giving global investors more reasons to reconsider how much of their portfolios belong in Europe.

The risk is that record prices leave less room for disappointment. Companies that miss earnings expectations are increasingly being punished, meaning the market will need continued profit growth to sustain the rally.

For now, Europe’s record market is increasingly being supported by the companies underneath it — not simply by investors hoping prices will keep rising.

JBizNews Desk | London

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