Europe Capital Markets Newsletter – 4Q25

European capital markets ended 2025 on a more stable footing. Currency markets consolidated after earlier strength, while government bond yields diverged across regions. Growth across the euro area and the UK remained modest, with inflation continuing to ease. Central banks maintained a cautious, data-dependent stance, with the ECB holding policy rates steady and the Bank of England delivering a small rate cut. European equities outperformed the US during the quarter, supported by banks, even as the valuation gap versus US markets remained wide. Against this backdrop, the report highlights Europe’s power grid upgrade as a structural, multi-year investment theme, as electrification increasingly outpaces grid capacity and drives sustained capital expenditure across transmission, distribution, equipment, and automation segments.