European Stocks Close at Record High, Outpace U.S. Equities to Start the Year

European stocks have closed at an all-time high as they continue to outpace U.S. equities for the first time in more than a decade.

The pan-European STOXX 600 index finished trading on Feb. 17 up 0.5% to 555.42 points, its highest ever close. The latest catalyst pushing the European index to a record high was aerospace and defense stocks that collectively rose 4.6% on expectations for greater defense spending on the continent. It was the largest one-day rise in European defense stocks since Russia invaded Ukraine in February 2022.

Defense stocks leading the European market higher on Feb. 17 included Britain’s BAE Systems, which rose 8.9%, and German conglomerate Thyssenkrupp, which soared 19.8% to its highest level in more than a year. Arms maker Rheinmetall gained 14% on the day.

Strong Start to the Year

The record close continues a strong start to the year for the STOXX 600 index, which is outpacing the benchmark S&P 500 index for the first time in more than a decade as investors rotate capital out of the U.S. and into international equities. So far in 2025, the STOXX 600 index is up 10% versus a 4% increase in the S&P 500.

The STOXX 600 index, which is a benchmark for Europe, has now logged its longest set of weekly gains since March 2024. And while defense stocks led the current rally, European equities have seen widespread buying this year across sectors such as banking, energy, and food staples, driven by views that European equities are comparatively cheap and undervalued vis-à-vis American stocks.

Is the iShares STOXX Europe 600 UCITS ETF a Buy?

The iShares STOXX Europe 600 UCITS ETF has a consensus Moderate Buy rating among 603 analysts. That rating is based on 379 Buy, 196 Hold, and 28 Sell recommendations issued in the last three months. The average ETF price target of €68.41 implies 25% upside from current levels.