Europe Capital Markets Newsletter – 2Q26

European capital markets remained mixed in 2Q 2026, as subdued growth, persistent inflation pressures, and divergent monetary policy shaped the market backdrop. Growth across Europe and the UK remained subdued, while the ECB raised rates and the Bank of England kept rates unchanged amid differing inflation and growth considerations. Equity market leadership rotated toward technology, banks, and consumer-related sectors, supported by AI optimism, resilient earnings, and improving risk sentiment, while energy stocks reversed earlier gains as lower oil prices weighed on performance. Against this backdrop, Europe continued to trade at a meaningful discount to the US, with the valuation gap reflecting stronger US earnings momentum and greater exposure to structural growth sectors. Within Europe, mining stood out as a sector where price weakness outpaced changes in earnings expectations, resulting in a valuation-led reset and a more selective opportunity set despite supportive long-term copper demand.