European stocks are all the rage as US markets sputter

After years of playing second fiddle to the US, European assets are now charging ahead and leaving Wall Street in the dust

European stocks remain cheaper than their 20-year average despite the recent rally. Picture: Nathan Laine/Bloomberg

Euro-area equity markets are up 38% since the end of September in US dollar terms, and enjoying their best start to a new year ever. Meanwhile, the region’s investment-grade credit is ahead of its US peers by six percentage points over the same period, and the euro currency has jumped 10% versus the greenback.

The key driving forces behind Europe’s revival have been the mild winter, which has soothed investors’ worries over the region’s energy crisis, and the sudden reopening of China — a crucial market for many European industries. And this may just be the beginning: European stocks remain cheaper than their 20-year average despite the recent rally, and top strategists from Citigroup and Goldman Sachs are upgrading their view on the region.