The pan-European STOXX 600 index’s 14.2% surge to start the year leads the globe, yet the EUR/USD exchange rate is trapped at an eight-year volatility low of 1.07. Behind this “stock-currency divergence” is a resonant effect of corporate valuation recovery, geopolitical dividends, and monetary policy games. As the afterglow of the European Central Bank’s quantitative easing lingers and the U.S. tariff list remains pending, Euro assets are undergoing the most dramatic repricing logic restructuring since the pandemic.
In 2025, the European stock market kicked off with stunning momentum. Germany’s DAX index has surged over 11% year-to-date, and the pan-European STOXX 600 index set a record with eight consecutive weeks of gains. This rally, dubbed the “European Miracle,” stems not only from corporate earnings recovery and the effect of low valuations but is also closely related to easing geopolitical tensions and spillover effects from U.S. policy. This section will break down the three main engines driving the strength of European stocks and discuss their sustainability.
Industrial giant Siemens‘s first-quarter earnings beat expectations, driving automotive stocks up 4.4% in a single day, indicating that the European manufacturing recovery is moving from expectation to reality. Analysts point out that the net profit margin of European companies is recovering at an average annual rate of 1.5 percentage points, and with a valuation discount of up to 30% compared to U.S. stocks, it creates a magnetic effect for value investing. It’s worth noting that defense stocks have benefited from a geopolitical risk premium, with a year-to-date increase of 15%, reflecting the market’s long-term bet on European defense autonomy.
Although the “America First” policy has exacerbated volatility in the domestic market, it has prompted a rebalancing of global capital allocation. The 15% annualized return of the European STOXX 50 index has outperformed the Nasdaq, showing that capital is shifting from high-valuation tech stocks to more stable European assets. According to Morgan Stanley data, hedge funds’ exposure to European stocks has increased from 17% to 19%, with a focus on increasing holdings in the semiconductor and industrial equipment sectors. This trend resonates with the potential export substitution effect that could be brought about by U.S. reciprocal tariffs.
The European Central Bank’s quantitative easing has boosted Eurozone inflation and output by 60 and 62 basis points, respectively. Combined with expectations of a Fed rate cut, this has formed a “weak dollar-strong European stocks” transmission chain. It is noteworthy that this rally in European stocks has been accompanied by a 23% increase in average daily trading volume, indicating that institutional investors are making strategic deployments rather than short-term speculations. However, whether the valuation recovery rally can be sustained will depend on whether companies can convert exchange rate advantages into order growth.
The EUR/USD exchange rate is repeatedly contested around the 1.07 mark, reflecting the market’s conflicting pricing of policy divergence on both sides of the Atlantic. Although researchers at the European Central Bank have lowered their inflation forecasts, suggesting a possible rate cut before the Fed, easing geopolitical risks and an expanding trade surplus still provide support. This section will deconstruct the exchange rate trend from the three dimensions of interest rate parity, capital flows, and technical patterns.
The European Central Bank’s Asset Purchase Programme (APP) once caused the euro to depreciate by 2.33% in a single day. Current market pricing has already factored in a 25 basis point rate cut in June. If the Fed postpones its easing schedule, the two-year U.S.-German government bond yield spread could widen to 150 basis points, triggering a break of the exchange rate’s annual moving average resistance. It is worth noting that net short positions in the euro have fallen to their lowest level since 2023, indicating that the momentum for shorting is waning.
The Eurozone’s trade surplus expanded to €21 billion in January, but U.S. reciprocal tariffs could reduce car exports by 6%. In terms of capital flows, the European REIT market has attracted a 63% increase in U.S. investment, while capital from the Asia-Pacific region has dropped to 9%, forming a “Western capital in, Eastern capital out” pattern. This structural change has made the euro less sensitive to risk-off sentiment and, instead, positively correlated with risk assets.
EU banks’ exposure to high-risk countries has reached €500 billion, accounting for 2.5% of total assets, indicating that geopolitical risk has shifted from a tail threat to a normalized factor. Investors need to re-weigh the balance between valuation advantages and political risks and establish a dynamic hedging framework.
Utility stocks are benefiting from Europe’s energy independence policies, offering a dividend yield of 4.2% with 15% lower volatility than the broader market. Insurance companies are increasing their holdings of euro-denominated corporate bonds to lock in a 3.8% yield while hedging against inflation risk. Alternative data shows that capital inflows into European stocks with an ESG rating of AA or higher are 47% greater than those into traditional assets, reflecting the trend of responsible investment.
Based on historical experience, if geopolitical conflicts escalate again (for example, a worsening situation between Russia and Ukraine), it could trigger a short-term correction of more than 10% in European stock markets. However, the current valuations of most blue-chip stocks are already near their five-year lows, which may provide some buffer for the market.
It is worth noting that the European Central Bank has significantly reduced the risk indicators of sovereign debt crisis contagion among member states through bond purchase programs (such as the OMT). At the investment strategy level, some institutions have already taken steps to reduce the sensitivity of their stock portfolios to market volatility (e.g., by reducing exposure to cyclical sectors) and have slightly increased their cash reserves to enhance flexibility.
The Eurozone market is currently at a balancing point of multiple forces. Diverging monetary policy paths, the cost of energy transition, and the restructuring of the geopolitical landscape continue to influence the direction of capital flows. Although short-term economic slowdown and debt pressures constrain policy space, the EU’s substantive progress in green industry investment (such as hydrogen infrastructure) and supply chain diversification may inject medium- to long-term stability into the market. In the future, it will be crucial to closely monitor the actual impact of variables such as energy price fluctuations and the efficiency of member states’ fiscal discipline enforcement on market confidence.
The market open refers to the moment when trading begins in financial markets such as stocks, futures, and foreign exchange. Each exchange has a fixed time every day to open the market, marking the start of the trading day. The opening is usually initiated automatically by the exchange’s system, all eligible orders begin to be executed, and market participants can start buying and selling.
Key features of the market open:
Fixed Time: The opening time for each market and exchange is fixed and usually occurs at a specific time each day. For example, stock markets typically open at 9:00 AM or another set time.
Price Formation: At the open, the market forms an opening price based on buy and sell orders. The opening price is the first transaction price of the trading day.
Market Volatility: The market may experience significant volatility at the open, especially for fast-moving markets (like stocks, futures, etc.). Investor sentiment and the previous day’s market performance can influence short-term trends after the open.
Start of Trading: The open marks the beginning of the day’s trading, and investors can immediately start buying and selling.
For example, the A-share market opens at 9:30 AM, while the U.S. stock market opens at 9:30 AM New York time (which corresponds to 9:30 PM Beijing time). Before the open, the market is closed, and no trading can occur.
The opening times for major European stock markets are as follows:
Opening Time: 8:00 AM (UK time, GMT)
Closing Time: 4:30 PM (UK time, GMT)
During daylight saving time (March to October), it adjusts to 8:00 AM BST.
Opening Time: 9:00 AM (German time, CET)
Closing Time: 5:30 PM (German time, CET)
During daylight saving time (March to October), it adjusts to 9:00 AM CEST.
Opening Time: 9:00 AM (French time, CET)
Closing Time: 5:30 PM (French time, CET)
SIX Swiss Exchange: Opens at 9:00 AM (Swiss time, CET) and closes at 5:30 PM (Swiss time, CET).
Borsa Italiana (Milan): Opens at 9:00 AM (Italian time, CET) and closes at 5:30 PM (Italian time, CET).
In summary, major European stock markets generally open at 9:00 AM CET (Central European Time), with some markets (like London) having a time difference.
Generally, the value of the US Dollar (USD) and the Euro (EUR) fluctuates due to various factors, including economic data, policy adjustments, international trade, and geopolitics. Based on current exchange rates, the face value of the US Dollar is typically lower than that of the Euro, but this doesn’t directly mean one currency is “more valuable,” as their respective purchasing power and market conditions differ.
In terms of exchange rates, 1 Euro is usually worth more than 1 US Dollar. For example, over the past few years, 1 Euro has been roughly equivalent to 1.1 to 1.2 US Dollars, meaning that the purchasing power of 1 Euro is higher when converted to USD.
US Dollar: The USD is the world’s primary reserve currency, widely used in international trade and financial transactions. The U.S. economy is one of the largest in the world, giving the dollar strong international influence.
Euro: The Euro is the official currency of 19 Eurozone countries and is the world’s second-largest reserve currency. It holds a significant position in international transactions, especially in Europe and countries with strong trade ties to the EU.
US Dollar: The USD is used more widely across the globe, not just in the United States but also as a transactional and reserve currency in many other countries and regions.
Euro: The Euro is primarily used in Eurozone countries (such as Germany, France, Spain, etc.). Its purchasing power is relatively strong, especially among consumers and businesses within the Eurozone.
In terms of face value, 1 Euro can typically be exchanged for 1.1 to 1.2 US Dollars. However, this doesn’t mean its purchasing power is superior to the dollar in all situations. The cost of living and prices of goods vary across different countries and regions, affecting the real purchasing power of a currency.
