European equity markets closed Monday’s session, February 2, on a firm footing, with major benchmarks posting solid gains as investors embraced selective risk-taking. The rally reflected renewed confidence in regional earnings resilience and easing concerns around near-term macro headwinds, even as European currencies weakened against the dollar.

Broad-Based Equity Gains Signal Improving Sentiment

Germany’s DAX led the advance, rising 1.06% to 24,798.79, supported by strength in industrials and export-oriented names. The EURO STOXX 50 followed closely, gaining 0.99%, signaling broad participation across the eurozone’s largest blue-chip companies.

France’s CAC 40 climbed 0.80%, while the Euronext 100 Index added 0.70%, reinforcing the view that investors are selectively re-engaging with continental European equities. Meanwhile, the FTSE 100 advanced 1.00%, benefiting from its heavy weighting in defensives and global earners, which tend to perform well during periods of currency weakness.

Sector Rotation and Defensive Support Drive the Rally

The session’s gains reflected a combination of cyclical rotation and defensive stability. Industrial and capital goods stocks benefited from optimism around global demand normalization, while financials found support amid expectations that interest rates will remain elevated for longer than previously anticipated.

At the same time, defensively positioned sectors such as healthcare and consumer staples provided downside protection, helping to stabilize indices even as volatility remains elevated globally. The MSCI Europe Index rose 0.32%, a more modest gain that nonetheless confirmed the positive underlying tone across regional markets.

Currency Weakness Highlights Divergence Beneath the Surface

Despite the strong equity performance, European currencies moved lower. The Euro Index fell 0.47%, while the British Pound Index declined 0.30%. This divergence suggests that capital inflows into equities are being driven more by relative valuation and earnings prospects than by confidence in regional currencies.

A softer euro and pound can support export-heavy companies by improving competitiveness abroad, which may partially explain the strength in Germany’s DAX and the UK’s FTSE 100. However, persistent currency weakness also reflects broader global dynamics, including sustained U.S. dollar strength and cautious expectations around European monetary policy.

Looking ahead, investors will monitor upcoming economic data, central bank guidance, and corporate earnings updates for confirmation that today’s rally has durable foundations. Continued equity strength alongside currency softness could favor export-driven sectors, while any resurgence in volatility may test the market’s recent gains. For now, Europe’s ability to close firmly higher suggests a market willing to engage selectively with risk, even as macro uncertainty remains firmly in focus.