EBC Markets Briefing | European stocks regained steam despite economic contraction

The Euro Stoxx 50 closed at a fresh record peak on Tuesday after JP Morgan raised its year-end target for European equity indexes, ‌citing corporate earnings strength and improvements in the geopolitical climate.

Inflation slowed more than expected across most major euro zone economies in June due to a sharp decrease in energy prices, easing pressure on the ECB to raise interest rates in the near term.

Energy analysts say they have been surprised by the pace of the sell-off in the oil market, noting that it has been far more aggressive than most had expected following a shaky peace deal.

European markets are drawing inflows as volatile AI stocks force prompt diversification, Morgan Stanley notes. The broker highlights semiconductors, financials, and copper miners as key tactical plays for the rest of the year.

Since early this year, Europe's significant valuation discount has steadily shrunk on a sector-adjusted basis, independent of the outsized influence of the Magnificent Seven.

Eurozone GDP went into negative territory in Q1, the first time in over 3 years. Q2 growth is expected to stagnate as the temporary boost from frontloaded purchases and defense spending fades.

The Stoxx 50 was locked in an aggressive medium-term uptrend. A daily close decisively above 6,330 triggers a formal "blue-sky breakout," meaning zero historical overhead resistance.

Asset recap

As of market close on 30 June, among EBC major products, AMD shares led gains, bolstered by Wells Fargo raising its price target to $615 with an "Overweight" rating.

Stryker shares slid today largely for technical reasons, as the stock is trading ex-dividend. Selling pressure is being amplified by Stryker's removal from the Russell Growth Index.

EBC Financial Group analyst says, the Nasdaq 100 finished June with their biggest quarterly gains since 2020 as investors remained upbeat about economic and earnings growth even amid ‌the Middle East conflict.

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