European equities extended their winning streak into the first week of August, with both the STOXX 600 and STOXX 50 reaching record levels for the fourth consecutive week. The STOXX 600 rose 0.3% to 659.91 points by mid-morning on Friday, while the STOXX 50 gained 0.2% on the day and finished the week up 2.4%. For the week, the STOXX 600 ended up 1.4%.

A robust earnings season has been the primary catalyst behind the rally. Companies across the index are now forecast to report second-quarter earnings growth exceeding 22%, according to data from LSEG. If realized, that would represent the strongest growth rate since the third quarter of 2022. The earnings momentum arrives against a backdrop of supportive monetary policy, with the European Central Bank having delivered a 25-basis-point rate cut in June — its first reduction since 2019 — while continuing to monitor inflation across the eurozone.

Healthcare Leads Sector Gains

Healthcare was the top-performing sector on Friday, advancing 1.8%. Danish cancer drugmaker Genmab led the way with a 9.6% jump after reporting higher first-half revenue and raising its full-year outlook. Novo Nordisk, Abivax, and Zealand Pharma all posted gains between 3.4% and 4.6%. Novo Nordisk has been a major force behind European equity performance in recent years, driven by surging demand for its GLP-1 weight-loss treatments Wegovy and Ozempic, which rank among the fastest-growing pharmaceutical products globally.

Other notable movers included SAP, up nearly 3%, and Rheinmetall, which added 2%. Novartis gained 1%, AstraZeneca rose 1.6%, and Airbus advanced 0.8%.

Czech defence firm CSG edged up 1.3% after reporting first-half revenue above expectations, driven by strong ammunition demand. The broader aerospace and defence index rose 0.9% for the day and was on track to be the week's best-performing sector, up 5.8%. European defence contractors have experienced sustained demand as NATO members push to meet or exceed the alliance's 2% of GDP defence spending target, a shift accelerated by the ongoing war in Ukraine.

Kingspan Surges on Data Centre Demand

Kingspan was the standout performer of the session, surging over 15% after the building materials firm raised its full-year profit forecast. The company cited booming data centre demand as the key driver behind the upgrade — a trend reflecting the large-scale global buildout of AI computing infrastructure by major technology companies.

Not all stocks shared in the gains. Munich Re slid 2.7% despite reporting a 6% rise in second-quarter net profit that beat expectations. Stellantis dropped 2.5% after Bernstein downgraded the carmaker's rating to underperform.

Macro Headwinds and Cautious Sentiment

Markets were also monitoring developments in the Middle East. Brent crude futures rose to $83.17 a barrel on renewed concerns over the Strait of Hormuz, following a proposal by Iran to ban certain vessels from the waterway.

On the economic data front, Germany's industrial production and export figures came in better than expected, providing a positive signal for Europe's largest economy, which has been grappling with weak industrial output and sluggish growth over the past year.

Investors remained cautious ahead of the US jobs report, as stronger employment numbers could give the Federal Reserve additional reason to hold off on interest rate cuts.

Gordon Kerr, European macro strategist at KBRA, noted that earnings are reinforcing the health of European corporate fundamentals, but cautioned that markets are becoming more selective as elevated valuations leave less room for disappointment.