Energy Sector Fuels European Equity Surge While US Markets Struggle

European stock markets outperformed their global counterparts this week, buoyed by strong gains in the energy and metals sectors. Rising energy prices, especially in oil and gas, drove significant gains, helping European indices such as the pan-European Stoxx 600, Germany’s DAX, France’s CAC 40, and the UK’s FTSE 100 to rise by 1.51%, 2.06%, 2.86%, and 1.16% respectively.

The energy sector led the rally, climbing more than 5% over the week, as oil and gas prices surged in response to increased winter demand and rising geopolitical tensions. Major companies like BP, Shell, and TotalEnergies saw share prices rise by up to 7%, contributing to the broader European market strength. Technology and financial sectors also saw strong performance, with notable increases from companies like ASML and SAP, and UBS shares climbing nearly 10%.

Despite the strong performance in European markets, the US dollar continued to strengthen, putting pressure on G10 currencies, including the euro and the British pound, which both reached multi-year lows against the dollar.

Challenges and Inflation Pressures Affect Other Global Markets

While European equities benefited from rising energy and metal prices, US markets were not as fortunate. Wall Street struggled with mixed results, as the Dow Jones, S&P 500, and Nasdaq Composite posted declines. US bond yields continued to rise, placing downward pressure on equity markets. Investors remained cautious following concerns about inflation and the uncertain policy stance of the US Federal Reserve, especially with incoming US President Donald Trump’s economic policies potentially leading to tighter fiscal conditions.

The labor market in the US also showed resilience, with job openings in November exceeding expectations, potentially signaling future pressures on markets depending on the upcoming non-farm payroll data.

Asian markets, particularly China, showed signs of economic challenges, with inflation slowing further and persistent deflation in producer prices. However, Australia saw improved inflation data, strengthening expectations of a rate cut from its central bank, which provided a boost to local stock markets.