European shares extended their rally to a fresh record on Thursday, as upbeat corporate earnings and falling energy costs drew investors toward the region's industrial and healthcare sectors. The pan-European STOXX 600 index advanced 0.3% to 665.38 points by 08:06 GMT, surpassing Wednesday's record close of 663.05. Germany's DAX also hit an all-time high, gaining 1%.
The latest leg of the advance was led by Siemens and Merck KGaA, both of which raised their financial guidance, reinforcing confidence that European companies can sustain profit growth even as higher interest rates and geopolitical uncertainties weigh on the broader market. The move also reflects a shift in investor priorities, with tangible earnings gaining appeal as Wall Street faces renewed scrutiny over expensive artificial intelligence investments.
Siemens and Merck give Europe's stock rally fresh momentum
Siemens rose 3.8% after lifting its medium-term comparable revenue growth target to 7%–11%, up from the previous 6%–9%. The German engineering group reported a 22% increase in fourth-quarter industrial profit to €3.89 billion, while orders jumped 58% to a record €34.77 billion, helped by railway contracts and demand for electrical infrastructure used in data centres. Management now expects revenue growth of 9%–11% in fiscal 2027, suggesting customers continue to invest despite uncertain financing conditions.
Merck KGaA gained 1.6% after raising its 2026 core earnings forecast for the third time this year. The drug and semiconductor-materials supplier now expects adjusted earnings before interest, taxes, depreciation and amortisation of €6.2 billion–€6.4 billion, compared with an earlier range of €5.9 billion–€6.3 billion. Its quarterly sales reached about €5.6 billion, supported by drug manufacturing supplies and advanced chip materials.
Europe's earnings boom comes with an energy-sector caveat
LSEG estimates published last week showed STOXX 600 companies heading for 25% third-quarter earnings growth, the strongest in four years. A more recent Deutsche Bank assessment put growth at 28%. Yet energy producers accounted for a disproportionate share of that strength, with sector profits expected to rise more than 150%. Excluding energy, LSEG's earlier forecast showed growth of a more modest 9.5%.
That distinction matters as oil retreats from the elevated levels that boosted producers' earlier results. Stronger earnings may support the index, but the headline growth figure does not describe every European industry equally. Barry Glavin, head of equity platform at Amundi, argued in the firm's November investment outlook that Europe offered attractive valuations and opportunities among established businesses, while investors remained wary of expensive technology shares and persistent inflation.
Why lower oil prices and AI rotation are helping Europe
Brent crude was trading around $93 a barrel, far below its recent highs, easing fuel costs for European importers, transport companies and manufacturers. Lower energy bills could also reduce inflation pressure, although shipping disruptions around the Strait of Hormuz remain a threat.
Citi strategists have upgraded European equities excluding the UK to overweight, according to The Wall Street Journal, citing the region's lower sensitivity to technology valuations and its greater potential benefit from cheaper oil. The STOXX 600 has gained about 4.7% this quarter, against a 0.4% decline in the S&P 500, underscoring the divergence.
Europe's rally is not simply a retreat from AI. Siemens' data-centre orders show the region can benefit from the same investment cycle through equipment sales, without requiring investors to embrace the valuations of US technology giants.
This article is for informational purposes only and does not constitute financial advice.
