European equity ETFs returned to net inflows in July for the first time since the US-Iran conflict broke out in late February, according to Bloomberg data. The shift suggests investors are again looking at Europe as an alternative to more volatile parts of the global equity market.
Lower oil prices, stronger-than-expected corporate earnings and a rotation away from crowded technology trades have all helped improve sentiment toward European stocks.
European ETFs See Fresh Demand as Investors Rotate From Tech
BlackRock said its European equity products attracted around $4.4 billion in July, highlighting a renewed flow of money into the region after several difficult months.
Part of that demand appears to be coming from investors reducing exposure to momentum-heavy technology and semiconductor stocks. A sharp July pullback across global chipmakers encouraged some portfolios to seek markets with less dependence on artificial intelligence and high-growth technology names.
Europe has benefited from that rotation because its major indexes carry much larger weightings in banks, industrials, energy and consumer companies.
The earnings backdrop has also strengthened the case for European equities. Companies in the Stoxx Europe 600 are currently on course to deliver roughly 22% year-over-year earnings growth for the second quarter, which would represent the strongest expansion since 2022.
Financial stocks have been among the strongest contributors. BNP Paribas reported quarterly profit growth of about one-third, while UBS posted a 17% increase in profit to a record level, helped by strong trading activity.
Wall Street Banks Raise Their Expectations for European Stocks
Improving fundamentals have prompted some major banks to become more optimistic about the region.
UBS recently lifted its year-end forecast for the Stoxx Europe 600 to 690 points from 630. Based on Friday’s closing level, the new target suggests approximately 5% additional upside.
Goldman Sachs has also identified several European companies with substantial potential in its latest stock selections. Its August outlook points to significant upside for UK clean-energy company Ceres Power and German defense group Rheinmetall over the next 12 months.
The broader European market has already delivered strong gains in 2026. The Stoxx 600 is up about 10.7% year to date and recently reached a record high of 663.4 points.
Several major national benchmarks have also traded at or near record levels, including Germany’s DAX, the UK’s FTSE 100, France’s CAC 40 and Spain’s IBEX.
European Stock Rally Still Faces Skeptics
Despite the renewed inflows and stronger earnings, the outlook is far from unanimous.
Some strategists believe European stocks have already priced in much of the good news. Societe Generale expects the Stoxx 600 to retreat toward 600 points, while TFS has projected a decline of roughly 9% to around 585.
That leaves investors with two competing views. Bulls see improving earnings, cheaper valuations and portfolio diversification supporting further gains, while bears argue that slowing growth or renewed geopolitical pressure could quickly reverse the recent inflows.
For now, July’s return to positive ETF flows provides another sign that international investors are once again giving European equities serious consideration.
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