European equities climbed to new record levels on Friday, closing out a volatile week shaped by strong corporate earnings, artificial intelligence volatility, Middle East tensions, and renewed uncertainty around US trade policy. Despite crosscurrents, investors maintained risk appetite, lifting the region’s benchmark indices to historic highs.

EURO STOXX 50 Extends Multi-Month Rally

The EURO STOXX 50 rose 0.4% to 6,180 points, gaining 0.8% on the week and marking its third advance in four weeks. The index has climbed nearly 4% in February alone and is on pace for its eighth consecutive monthly increase — a streak that underscores sustained investor confidence in European corporates.

As of February 27, the broader Euro Area benchmark stood at 6,164 points, up 0.13% on the session, 3.90% over the past month, and 12.83% year-over-year. The index previously touched an all-time high of 6,208.30 earlier in February.

The rally reflects a rotation into European equities amid relatively stable earnings delivery and valuations that remain attractive compared to US peers.

Corporate Earnings Provide Tailwinds

Individual stock performance reinforced bullish sentiment. Swiss Re surged 4.8% after reporting nearly a 50% jump in net profit, highlighting strong underwriting performance and improved capital returns.

In the travel sector, International Airlines Group gained 0.5% after announcing record 2025 financial results, with operating profit rising 13% and revenue up 3.5%. Amadeus IT Group added 0.9% after beating fourth-quarter earnings expectations, suggesting continued resilience in global travel demand.

Earnings strength has helped offset periodic volatility tied to AI-related concerns and geopolitical developments.

Inflation Signals Add Policy Complexity

On the macro front, flash inflation data from France and Spain surprised to the upside, reinforcing expectations that price pressures remain sticky across parts of the Eurozone.

Persistent inflation complicates the European Central Bank’s policy outlook, particularly as growth stabilizes. If inflation proves more entrenched than anticipated, expectations for rate cuts could be delayed — a development that may eventually test equity valuations.

For now, however, investors appear focused on earnings resilience and global diversification benefits. With US markets grappling with tariff recalibrations and AI volatility, Europe has emerged as a relative beneficiary of capital rotation.

Looking ahead, sustainability of the rally will depend on three key variables: continued earnings delivery, inflation trajectory, and the ECB’s rate path. If corporate performance remains robust while policy risks stabilize, European equities could extend their historic run into the second quarter.