Investors pour record sums into European stocks - ft

Investors pour record sums into European stocks - ft

Investors Pour Record Sums Into European Stocks Amid Diversification Shift

Global investors have directed record inflows into European equities in February 2026, driven by a strategic shift away from U.S. markets and growing confidence in the region's economic recovery. According to EPFR data, European stocks have seen approximately $10 billion in weekly fund inflows for two consecutive weeks, marking the highest monthly inflows on record. The Stoxx Europe 600 index has reached a series of record highs, with similar gains observed in the UK's FTSE 100, France's CAC 40, and Spain's IBEX 35.

The rotation away from U.S. markets—particularly the tech-heavy S&P 500—has accelerated as concerns over overvaluation in AI-linked stocks persist. European markets, with their stronger representation in "old economy" sectors like banking and natural resources, have attracted capital seeking diversification. The FTSE 100, for instance, has surged nearly 7% year-to-date, with resource firms such as Weir Group and Antofagasta rising over 20%. The Stoxx Europe 600 trades at a price-to-earnings ratio of 18.3, compared to 27.7 for the S&P 500, further highlighting its relative value.

Germany's economic rebound has also bolstered investor sentiment. The country returned to growth in 2025 for the first time since 2022, and a recent surge in factory orders has reinforced optimism about the impact of increased defense and infrastructure spending. German defense stocks, including Rheinmetall and BAE Systems, have gained 12–26% in 2026, reflecting confidence in long-term fiscal policies. Analysts note that European-focused funds have attracted steady inflows over the past year, reversing years of outflows.

While U.S. and Asian investors lead the trend, Japanese buyers are increasingly drawn to Europe's undervalued equities. However, some investors remain cautious, citing Europe's projected earnings growth of less than 4% for the current quarter—well below the S&P 500's 12%—as a potential headwind.

Overall, the shift underscores a broader strategy of diversifying across sectors, currencies, and geographies to mitigate risks in an increasingly fragmented global market.

(https://www.ft.com/content/80173261-2b72-41f7-9eae-490aabb14623): Financial Times, February 2026.