More gains in Europe today: The trade of 2025 wasn't AI, it was Southern Europe

The German DAX has been bouncing around for months but shook off some selling at the start of the week to post a solid gain. It was indicative of the continent, which finished Friday solid to cap an ok week. There was better strength in southern Europe, just like there has been all year. The UK also benefitted from the BOE rate cut.On the day:German DAX +0.4%France’s CAC +0.3%UK’s FTSE 100 +0.7%Spain’s Ibex +0.45%Italy’s FTSE MIB +0.7%On the week:German DAX +0.4%France’s CAC +1.3%UK’s FTSE 100 +2.6%Spain’s Ibex +2.0%Italy’s FTSE MIB +2.8%Everyone talks about American exceptionalism, but look at the scoreboard. The S&P 500 is having a solid year (up ~16%), but it’s getting lapped by Madrid and Milan.Looking back on the year so far: IBEX 35: The absolute star of the show. Up 48.36% YTD and adding another 2.06% this week alone. Breaking 17,000 is a massive psychological win. FTSE MIB: Not far behind, sitting on a 30.91% YTD gain and up 2.85% this week.DAX : The industrial engine is humming, up 22.01% YTD. FTSE 100: Even the FTSE is joining the 20% club, up 21.12% YTD and finding late-year momentum (+2.59% WTD). CAC 40 The laggard of the group, but still holding double-digit gains at +10.72% YTD.If that looks good, keep in mind that the euro is up 13% year-to-date so those returns in US dollars are significantly amplified. I highlighted earlier how there are challenges for Europe in the year ahead as the ECB has moved to the sidelines. The ECB growth assumptions are on the optimistic side and the inflation problem hasn’t gone away, particularly in services. The thing is, Europe is still very cheap and the market is increasingly looking for shelter away from the AI trade.
This article was written by Adam Button at investinglive.com.

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