Europe Capital Markets Newsletter – 3Q25

European markets extended their gains in 3Q25 (STOXX Europe 600 +3.3%; FTSE All-Share +5.7%), but US equities outperformed, with the S&P 500 advancing 7.9% on strong earnings momentum and policy tailwinds. Defense (+13%) and STOXX Europe 600 Banks (+13.5%) outperformed; tech and real estate lagged broadly. The US-Europe valuation gap widened to roughly 54%, driven by the Fed easing and technology momentum in the US, versus Europe’s headwinds from a 15% US tariff, weak German growth, and instability in France. Back in April 2025, we highlighted that European companies with high international sales exposure were best positioned to benefit from multiple expansion and resilient earnings growth. Revisiting that view now, the thesis stands confirmed. The screened cohort has re-rated toward historical valuation ranges and outperformed the broader European market, with the median P/E rising from 17.5x to 19.0x. Between 18 April 2025 to 23 October 2025, our cohort delivered +21.2% returns versus +15.2% for the iShares STOXX Europe 600 ETF (EXSA)