The European equity markets delivered a robust performance for the week ending February 27, 2026, with the MSCI Europe Index closing at 2,845.88, up +0.21% on Friday alone. While volatility characterized the early part of the week—visible in the chart’s mid-week dip—buyers stepped in aggressively around the 2,810 level, driving the index toward its 52-week ceiling. This resilience comes as investors increasingly price in a “Goldilocks” scenario for the Eurozone: falling inflation and steady economic support from the European Central Bank (ECB), contrasting sharply with the valuation concerns currently capping gains in the US technology sector.

Testing Resistance: A Technical Breakout in Sight?

Technically, the index is showing constructive momentum. As seen in the 5-day chart, the market successfully defended the 2,810 support level on Tuesday and Wednesday, using it as a springboard to rally into the weekend. The closing price of 2,845.88 leaves the index less than 10 points away from its 52-week high of 2,855.32. A decisive break above this level next week would likely trigger a fresh wave of technical buying, potentially opening the door to the psychological 2,900 barrier. However, the intra-week volatility suggests that traders remain quick to take profits, particularly in the industrial and travel sectors, where heavyweights like Rolls-Royce and IAG faced pressure this week despite the broader rally.

The Macro “Sweet Spot”: 1.7% Inflation and 2.15% Rates

The fundamental engine behind this week’s move is the favorable monetary environment. With January’s inflation data finalizing at 1.70%—comfortably below the ECB’s 2% target—and the policy interest rate sitting at 2.15%, European equities are enjoying a liquidity tailwind that is currently absent in other developed markets. This “easy money” environment is lowering the cost of capital for European corporates and making dividend yields more attractive relative to bonds. For Israeli investors comparing global allocations, Europe currently offers a clearer path to monetary easing than the Federal Reserve, which continues to grapple with stickier US inflation data.

Valuation Rotation: The “Buy Europe” Call Gets Louder

A significant narrative shift emerged this week from major institutional desks. Strategists at Bank of America and Société Générale issued notes suggesting that the long-awaited rotation from US dominance to international markets may be underway. SocGen noted that “deeply discounted” stocks are becoming scarce in Europe, implying that the valuation gap is starting to close. This sentiment is crucial for portfolio strategy; if global capital flows begin to rebalance away from the crowded US tech trade, indices like the MSCI Europe—heavy in financials, healthcare, and industrials—stand to be the primary beneficiaries.

Looking ahead to next week, the primary focus will be whether the index can pierce the 2,855.32 resistance level. Investors should monitor the upcoming Eurozone sentiment data and any commentary from ECB officials regarding the trajectory of the 2.15% rate. While the trend is undeniably bullish, the proximity to all-time highs often invites volatility. A failure to break out could see the index consolidate back toward the 2,830 range. Conversely, a confirmed breakout would validate the “International Rotation” thesis, potentially signaling a multi-week rally.