The pan-European STOXX 600 index closed modestly higher on Monday, at 618.52 points (+0.13%), snapping a recent volatile patch as financial shares rallied and investors shifted focus to a packed corporate earnings calendar that could provide fresh insight into the health of European businesses.
Financials led the advance, with the banks sub-index (.SX7P) rising 1.4% and insurance stocks (.SXIP) gaining 0.7%. The rebound came after lenders suffered their largest weekly drop since late March 2025 last week, driven by fears that newer generative AI tools could disrupt traditional banking and insurance models.
“The AI scare trade is on hold as we start a new week,” said Kathleen Brooks, research director at XTB. “There is a growing sense that fears about AI swallowing up large swathes of global jobs and industries are overdone and this week could see a recovery in some of the sectors that have seen the worst of the selloff.”
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The bounce in heavyweight banks helped offset weakness in technology (.SX8P, -1.0%) and luxury (.STXLUXP, -1.9%). French software company Dassault Systèmes fell sharply by 10.4%, weighed down by investor concerns over its challenging 2029 revenue and cloud targets. Basic materials shares also declined 0.6%, pulling back after a recent strong run. Spain’s IBEX index, heavily weighted toward banks, led gains among major regional benchmarks, rising 1%.
The broader recovery followed a better-than-feared early earnings season despite steep U.S. tariffs, which helped the STOXX 600 touch a record high last week and post its third consecutive week of gains. With Monday relatively quiet on the earnings front, attention now turns to results due later this week from Orange, Zealand Pharma, Airbus, and BE Semiconductor.
So far, 60% of European companies have beaten earnings expectations this season—above the typical quarterly average of 54%—while earnings are now expected to have fallen 1.1% year-on-year, a significant improvement from the 4% drop anticipated earlier in the month (LSEG data).On the economic front, euro zone industrial production rose 1.2% year-on-year in December—down from November’s 2.5% increase—but still signaled resilience at a time when investors are anticipating that fiscal stimulus measures could revive the sector.
Orsted gained 4.5% after Kepler Cheuvreux upgraded the Danish offshore wind developer to “buy” from “hold.”The modest advance reflects a broader shift in sentiment. After weeks of volatility in late January and early February—driven by fears that advanced AI tools from Anthropic, OpenAI, and others could squeeze profits in software, financial services, and other knowledge-based industries—investors appear to be reassessing the immediacy and severity of the threat.
A string of better-than-expected earnings results, combined with signs that large corporations are integrating AI to enhance rather than replace existing operations, has helped stabilize sentiment. The financials rally is particularly notable as banks and insurers had been under pressure from concerns that generative AI could automate routine tasks (loan processing, claims handling, compliance checks) and erode pricing power.
The rebound suggests investors are increasingly viewing AI as a tool for efficiency gains rather than an existential threat—at least in the near term.
The week ahead will be pivotal. Earnings from Orange, Zealand Pharma, Airbus, and BE Semiconductor will provide further evidence of corporate health amid tariff headwinds and AI disruption fears. Euro zone industrial production data already showed resilience, and upcoming releases—including U.S. payrolls, CPI, retail sales, and Fed speakers—could influence global risk appetite and yield movements, indirectly affecting European equities.
While AI concerns have eased somewhat, they remain a key risk theme. Sectors with high exposure to routine knowledge work or legacy software maintenance continue to trade at discounted multiples. Conversely, companies demonstrating clear AI integration strategies and resilient end-market demand are seeing relative strength.
The STOXX 600’s recent record high and three-week winning streak indicate that fears of widespread AI-driven profit destruction may have been overdone—at least for now. However, with a busy earnings calendar and macro data ahead, volatility could return quickly if results disappoint or if fresh AI breakthroughs reignite disruption worries.
Currently, the financials-led bounce and focus on upcoming earnings suggest investors are willing to give European corporates the benefit of the doubt, betting that AI will prove more evolutionary than revolutionary for most established businesses in the near term. The week’s results will be critical in testing that optimism.