European Stocks Surge on AI Optimism Marking Best Week Since May

The European stock market celebrated its strongest weekly performance since May, as investor optimism surrounding advancements in artificial intelligence (AI) fueled a six-day rally. The Stoxx Europe 600 Index gained 0.5%, reaching an all-time high, with the mining and healthcare sectors outperforming the broader market, whereas food and chemical sectors lagged.

Despite a slight pullback earlier in the day, driven by political developments in France, the French CAC 40 Index ended up by 0.3%. The French government's budget proposal faced criticism for lacking depth, a factor that troubled efforts to break a political deadlock. In corporate news, Swiss chocolate maker Barry Callebaut saw a reversal in its stock performance, dipping 0.4% after discussions about potential privatization by its major shareholder emerged.

As the fourth quarter begins, European equities continue their robust upward trajectory. Factors like rising pharmaceutical stocks and market speculation over potential Federal Reserve rate cuts have acted as significant catalysts. The influx of substantial capital into the AI industry is expected to bolster earnings and propel the tech sector's continued growth.

Union Bancaire Privée's expert Maud Giese highlighted that the stock market rally this year has been primarily driven by price-to-earnings multiple expansions. However, she cautioned that market sentiment could quickly reverse if macroeconomic risks materialize.

On the corporate front, Dutch firm ASML reiterated confidence in its long-term growth outlook, driven by burgeoning demand for semiconductors within the AI sector. The company projected global semiconductor sales to surpass $1 trillion by 2030, with a compounded annual growth rate of approximately 9% from 2025-2030. It also plans to enhance shareholder returns through increased dividends and stock buybacks.