European stock markets were set to open higher on Friday, offering a tentative rebound after two consecutive sessions of heavy losses. Futures tied to the Euro Stoxx 50 and the Stoxx 600 pointed to gains of roughly 0.5%–0.6%, as investors reassessed corporate earnings and macro signals rather than extending broad-based risk aversion. The shift reflects a market attempting to stabilize after a week marked by elevated volatility, profit warnings, and renewed debate over Europe’s growth outlook.

Earnings Repricing Drives Selective Recovery

The immediate backdrop for the bounce is technical as much as fundamental. Several large-cap stocks had been aggressively repriced over the past two sessions, creating conditions for a relief move. That dynamic was amplified by the dramatic selloff in SAP, whose shares plunged 16% on Thursday after the company disappointed on cloud revenue and warned that backlog growth could slow in the year ahead.

The SAP shockwave weighed heavily on European technology and growth stocks, reinforcing investor sensitivity to execution risks in high-multiple names. Friday’s rebound, however, suggests that markets are differentiating between company-specific disappointments and the broader earnings landscape, which remains mixed rather than uniformly weak. Financials and defensives, in particular, have shown relative resilience as investors rotate toward earnings visibility and cash-flow stability.

Stronger Euro Alters the Macro Conversation

Currency markets have emerged as a key influence on European equities this week. The euro’s recent strength has rekindled hopes that imported inflation pressures may ease more quickly, especially in energy and manufactured goods. For equity investors, this introduces a nuanced trade-off: while a stronger currency can weigh on exporters’ competitiveness, it also strengthens the case for a more accommodative monetary stance later in the year.

That prospect is increasingly relevant as markets look ahead to the European Central Bank’s next moves. With headline inflation already moderating, a firmer euro could provide policymakers with additional room to consider rate cuts without reigniting price pressures. This expectation has helped support rate-sensitive sectors, including real estate and utilities, even as growth-sensitive areas remain cautious.

GDP Data Looms as the Next Test

Attention now turns to fourth-quarter GDP figures from across the eurozone, with consensus expectations pointing to a slowdown on both a quarter-on-quarter and year-on-year basis. While such data is unlikely to surprise markets dramatically, it will shape investor confidence around whether Europe is facing a shallow growth pause or a more persistent stagnation.

Equity sentiment remains fragile, particularly after January’s strong start left valuations exposed to earnings disappointments. Still, the latest futures rebound indicates that investors are not abandoning European assets wholesale. Instead, positioning appears more selective, with capital gravitating toward balance-sheet strength, pricing power, and sectors less exposed to global demand swings.

What to Watch Next

As trading opens, markets are likely to remain headline-driven, balancing corporate updates, macro releases, and currency moves. The sustainability of the rebound will depend on whether earnings fears remain contained and whether GDP data aligns with expectations rather than undershooting them. For now, European equities appear to be entering a phase of consolidation rather than capitulation, with investors recalibrating risk rather than retreating outright.