AI pullback proves a "boon" instead, European stocks hit record highs, and the Stoxx 600's momentum of outperforming global markets continues.

Driven by capital outflows from artificial intelligence (AI) trades and a strong earnings season, European stocks extended their outperformance, breaking through their previous closing record. Data showed that the Stoxx Europe 600 Index rose as much as 0.7% intraday on Thursday, surpassing its August high, with mining stocks and consumer product stocks leading gains. The index had already climbed sharply on Wednesday as the U.S. midterm election results ignited broad risk appetite across the market. Oil prices falling back below $100 per barrel also provided support. "From a valuation perspective, Europe is slightly below its historical average, so the record we are seeing today is related to fundamentals and a fairly good earnings season," said Alexandre Baradez, chief market analyst at IG in Paris. "The macro environment and corporate earnings have together pushed the index to a record." Heavyweight stocks such as HSBC HOLDINGS, Santander and Rolls-Royce Holdings contributed the most to the index's gains. Since the start of October, this pan-European benchmark has outperformed the MSCI All Country World Index and is on track for its best relative quarterly performance since the first quarter of 2025. Europe is a beneficiary of the retreat from the AI trade, with investors shifting into defensive stocks such as healthcare and consumer staples. Companies have also delivered better-than-expected results this earnings season. Compiled data showed that MSCI Europe index profit growth for the third quarter is expected to exceed 32%, the best performance since early 2022. Next, market attention will turn to how the midterm election results affect the Iran situation, tariff policy, and the possibility of changes in U.S. policy prospectschanges that could boost renewable energy and may put pressure on the AI trade. "European stocks are being boosted because the market is optimistic that a Democratic majority could reverse some of Trump's more negative policies, such as tariffs and the withdrawal of support for Ukraine," said Wolf von Rotberg, equity strategist at Bank J Safra Sarasin. "This expectation is not unfounded, but Trump has enormous executive power, and whether it can be realized still depends on his willingness to cooperate." The UK's FTSE 100 Index also rose as much as 0.9%, hitting a record high. The market is awaiting the Bank of England's interest rate decision. Investors widely expect the central bank to raise rates by 25 basis points to 4%, the first rate hike in more than three years.