European stocks surge as U.S. markets falter

European stock markets have shown remarkable strength since the beginning of 2025, led by significant gains in major indices such as the CAC 40 in Paris and the DAX in Frankfurt. As of February 18, the CAC had risen by 9.5 percent and the DAX by 12.1 percent, outpacing both the FTSE 100 and the S&P 500. This surge can be attributed to several encouraging factors, including positive earnings revisions and the ongoing speculation surrounding a potential peace agreement concerning the Russia-Ukraine conflict. It is important to note, however, that historically, European markets have often started the year strongly, only to succumb to lower performances compared to their American counterparts by year-end. Analysts have pointed out that while the outlook for Europe looks relatively positive, the U.S. still commands over 70 percent of global equity market capitalization, which can significantly influence market dynamics. Goldman Sachs strategists have raised their projections for European markets amid expectations of a peace deal between Russia and Ukraine, which could lead to lower risk premiums, lower energy prices, enhanced consumer confidence, and improved economic growth. Meanwhile, some experts caution that this recent performance might be misleading due to European stocks starting from a lower base. Despite changing market sentiments, the momentum in European equities raises questions about their sustainability and the potential impact of differing earnings revisions between the U.S. and Europe.