Europe's stock market is firing on all cylinders and drawing in money managers, who say this rally will be more durable than just another short-term trade.

Whether it's earnings, economic growth, sentiment surveys or fund flows, market metrics across the board show a major shift is underway in European stocks. The price action reflects that. The Stoxx Europe 600 Index gained every day last week in its longest streak since June.

"There is definite excitement about Europe," said Helen Jewell, international chief investment officer for fundamental equities at BlackRock. "The region's resilience has surprised the market and demand remains a lot firmer than had been expected."

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For a long time, one of the big draws of European stocks was that they were extremely cheap compared with the US. But with Europe Inc. reporting its best earnings growth in four years at 17%, and the strongest economic momentum since March 2023, more strategists see improved fundamentals underpinning this rally.

"With the balance of risks tilted to earnings beating expectations for this quarter, we think now is the time to review and potentially add to European equities," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

The latest Bank of America Corp. survey showed a net 2% of fund managers are now overweight European equities, compared with 15% who were underweight in June. A Citigroup analysis found Europe was the only major region to enjoy a meaningful improvement in risk appetite in the final week of July.

That sets up equity indexes to extend a record-breaking run in the second half of 2026. The Stoxx 600 has rallied 11% this year, with regional benchmarks including the German DAX, French CAC 40 and Italian FTSE MIB hitting all-time peaks.

The gains are also being driven by a broader swath of stocks. About 75% of the Stoxx 600's constituents are trading above their 200-day moving average, near the top of the range of the past decade.

Signs of cooling hostilities between Washington and Tehran have boosted sentiment, although concerns linger about a full reopening of the Strait of Hormuz. Oil prices have declined from their July peak, easing inflation worries.