European stocks edged higher on Friday, buoyed by a dip in bond yields and stronger-than-expected economic data that helped improve investor sentiment. The pan-European STOXX 600 index gained 0.2% by 0843 GMT, on track for a sixth consecutive week of gains.
Key Index Highlights
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Germany’s DAX rose 0.5%, hovering near record highs after revised data revealed that the German economy grew more than initially estimated in Q1. The index continues to benefit from investor optimism around government plans to ramp up infrastructure and defense spending.
“The DAX has been a bright spot in global markets this year,” noted Russ Mould, Investment Director at AJ Bell, highlighting Germany’s appeal for value investors versus US equities.
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The UK’s FTSE 100 rose 0.4%, supported by an unexpectedly strong retail sales report for April, signalling consumer resilience in the face of inflationary pressures.
Market Context
Earlier this week, stock markets came under pressure from surging US Treasury yields, which reignited concerns over the US’s growing debt burden. However, markets regained footing as yields retreated following the US House of Representatives’ approval of a major tax and spending bill backed by President Donald Trump.
Additionally, business surveys in May had signalled economic weakness in the euro zone, but resilient corporate earnings and Trump’s decision to pause new tariffs on key trading partners helped boost investor confidence.
Notable Stock Movements
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AJ Bell surged 6.9% after the UK-based investment platform reported a 12% year-over-year increase in pre-tax profit, driven by rising client engagement.
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Michelin gained 0.8% following an upgrade to “buy” by Jefferies, which cited strong earnings growth potential for the French tire manufacturer.
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Games Workshop, the British maker of miniature wargames like Warhammer, fell 3.8% after Peel Hunt downgraded the stock, projecting a £10 million hit from US tariffs.
Outlook
The easing of bond yields across both the US and Europe provided breathing room for equity markets, but underlying risks remain. From ongoing US fiscal tensions to potential tariff escalations, investors are advised to remain cautiously optimistic.
Nevertheless, Europe’s relatively lower valuations, strong corporate earnings, and government stimulus efforts continue to underpin a positive medium-term outlook for regional equities.
