European markets are regaining investor favor as the region’s economy has
weathered the Iran conflict better than expected, monetary policy prospects look
clearer relative to other regions, and limited AI exposure has reduced
tech-driven volatility. The Stoxx Europe 600 is trading near record highs and
the euro is at a three-month peak; LSEG/Lipper data show $2.44bn of inflows into
European equities in the week to Aug. 12, the largest weekly inflow since the
week to Feb. 25, before the outbreak of the US-Iran conflict. The conflict has
added inflationary pressure, pointing to the possibility of further ECB
tightening; investors say the ECB’s clearer guidance versus the Fed and BOJ is
supportive. Morgan Stanley chief Europe equity strategist Marina Zavolock said
inflation is positive for equities so long as it does not trigger a recession —
a backdrop she sees now, which helps explain gains in European stocks,
particularly banks.
