European shares extend gains as positive mood persists

The upward trend in European markets continues this week, with the bullish sentiment showing no signs of fading.

European equities moved higher at the start of trading on Tuesday, building on the optimistic tone seen during Asian hours. Even the surprisingly strong US inflation data from the previous day has failed to dampen the mood, with American stock futures also joining the rally.

S&P 500 futures climbed 0.6%, while Nasdaq futures led with a 1.5% gain, marking a sharp reversal from the sell-off triggered by inflation concerns that sent US stocks lower and pushed Treasury yields higher. However, it is worth noting that the US bond market is closed on Tuesday for Veterans Day, which could complicate the equity rebound as fixed-income traders are absent.

European indices opened with the following gains:

• Eurostoxx +0.9%
• Germany DAX +0.9%
• France CAC 40 +0.6%
• UK FTSE +0.7%
• Spain IBEX +0.3%
• Italy FTSE MIB +0.7%

Regional stocks continued their strong performance, with the DAX approaching all-time highs again. Germany's benchmark index is nearing its record level of 26,692, while the broader STOXX 600 is also trading close to its historic peak.

What is driving this sustained rally?

A sharp decline in oil prices has provided significant relief for European equities. Expectations of reduced tensions in the US-Iran conflict have alleviated concerns about energy-driven inflation, giving businesses more flexibility in managing costs and operations.

Additionally, European corporate earnings have held up better than anticipated, with banks enjoying a particularly strong start to the week. Deal-making optimism and positive results from institutions such as UniCredit have lifted the sector, indicating that the rally is not solely dependent on Wall Street's performance.

The key question this week is whether investors are genuinely regaining confidence in stocks or simply choosing to overlook the risks that have dominated recent weeks. With the US bond market closed today, a clearer picture may not emerge until Wednesday. For now, bullish sentiment prevails, but as European stocks approach record levels, the sustainability of this rally remains uncertain.