European Stocks Slip from Record High, but Optimism Remains

European Market Update

The European stock market experienced a slight drop on Friday, with the Stoxx Europe 600 index declining by 0.5%. This reversal came after the index had earlier approached a record high. The decline was largely driven by a selloff in US technology stocks, which had a ripple effect on global markets.

Sector Performance

While some sectors, such as travel and leisure, as well as utilities, performed well, others like banks and basic resources led the decline. Notably, UBS Group AG shares rose by 2.5% to their highest level since 2008, following a proposed compromise solution regarding the bank's capital levels.

Sportswear stocks also saw an uptick, with Lululemon Athletica, Adidas AG, and Puma SE all experiencing gains after Lululemon boosted its full-year outlook.

Expert Insights

According to Gilles Guibout, head of European equities at AXA IM, the expectation of improving European growth could lead to double-digit earnings growth in 2026, providing no reason for bearish sentiments. Karen Georges, a fund manager at Ecofi Investissements, believes that investors are looking to buy into this year's laggards, making it a good time to diversify portfolios.

Market Forecast

The Stoxx Europe 600 Index is expected to rise by about 7% by the end of next year, reaching 620 points, based on the median forecast from a Bloomberg survey of 17 strategists. This level of optimism has not been seen since 2018.

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