As mounting concerns around economic growth gripped markets this week, creating further volatility in US Big Tech stocks, investment experts highlight examples of key European stocks that have been performing well recently.
US stocks sold off heavily on Monday, with the tech-heavy Nasdaq (^IXIC) tumbling 4%, after US president Donald Trump declined to rule out declined to rule out the possibility that the US economy could dip into a recession this year in an interview on Sunday.
This punishing sell-off in US stocks spread on Tuesday. While losses eased on the Nasdaq (^IXIC) on Tuesday, with the index closing the session down just less than 0.2%, the S&P 500 (^GSPC) fell 0.8% and the Dow Jones Industrial Average (^DJI) dropped 1.1%.
This is just the latest bout of volatility to hit US markets, with the S&P 500 (^GSPC) down 5% year-to-date, while the Nasdaq (^IXIC) has fallen 9.7%. The Nasdaq (^IXIC) is a more tech-focused index and the S&P 500 (^GSPC) is a broader market representation of the biggest companies in the US but is still heavily weighted to the tech sector.
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In addition to economic and geopolitical fears, there have also been lingering concerns around the level of spending on artificial intelligence (AI) by major US tech companies, in the wake of DeepSeek's release of a lower cost AI model. This created nervousness ahead of the Magnificent 7 tech giants releasing their latest earnings, with six of these seven stocks now down year-to-date.
By comparison, European markets, which have less exposure to big tech companies, have seen stronger performance so far this year.
The UK's FTSE 100 (^FTSE) is up 4.6 3% year-to-date, while the pan-European STOXX 600 (^STOXX) has gained 7.7% in that time.
"European stocks had been unloved compared to their US peers, but there is now renewed enthusiasm as the economic and profit outlook for Europe improves, while Trump unleashes uncertainty for the mighty US economy," said Susannah Streeter, head of money and markets at Hargreaves Lansdown (HL.L).
Here are some examples of some European stocks in more traditional sectors that experts highlight has performing well so far this year.
"European airlines have been among the biggest gainers of the past week after Air France-KLM (AF.PA) posted better than expected annual results," said Streeter.
This saw the stock fly to a five-year high, up 25% year-to-date, along with lifting Lufthansa (LHA.DE) and Wizz Air (WIZZ.L) shares.
Air France-KLM (AF.PA) posted full-year group revenue of €31.5bn, up nearly 5% on 2023. Operating profit for the fourth quarter also beat expectations, according to Reuters, coming in at €396m versus estimates of €205m.
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In a note released on Monday, JPMorgan (JPM) analysts kept an "overweight" rating on the stock.
"Air France-KLM (AF.PA) far exceeded expectations with its Q4 earnings print and positive outlook for 2025, which marks a positive inflection point in earnings momentum for the first time over the last 12 months," they said.
"We see good signs for 2025 pricing growth, and three tailwinds around transatlantic strength, increasing premium mix, and lapping of the Paris impact."
Streeter highlighted that European car manufacturers have acted as a defensive play recently, with Volkswagen (VOW3.DE) climbing 14% over the past month and nearly 21% year-to-date.
"Even the threat of tariffs on the EU hasn’t dented confidence," she said. "There may be hopes that they’ll benefit from increased brand loyalty just as Tesla (TSLA) faces a backlash in Europe for Elon Musk’s controversial politics."
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In results released on Tuesday, Volkswagen (VOW3.DE) posted revenue of €324.7bn (£273.5bn) for the year, up slightly from €322.3bn in the previous year. For the year ahead, Volkswagen (VOW3.DE) said it expected sales revenue to grow by 5% and to deliver an operating margin of 5.5% to 6.5%.
Deutsche Bank analysts reiterated a "buy" rating on the stock in a note on Wednesday.
"We identified VW as our top-pick in our '25 Auto outlook ... as we saw an inflection point for the story," they said. "The results published today confirm this, in our view, with Q4 earnings being 19% ahead of consensus and the 2025 guidance calling for mid-single-digit upgrades driven by multiple sub-segments."
European defence stocks surged recently, amid heightened geopolitical tensions and expectations that Europe will end up shouldering more of the responsibility for its security.
"As Europe’s leaders meet this week to thrash out detail for plans to boost military spending after being given the cold shoulder by the Trump administration, some defence stocks have still been resilient," said Streeter. "Even though they have retraced some gains, given hopes about a Ukraine ceasefire, Saab AB (SAAB-B.ST), the Swedish aerospace and defence company, has risen 3% over the past week."
The stock is up nearly 64% year-to-date and in results released in February, Saab AB (SAAB-B.ST) posted revenue of 63.8 billion Swedish krone (£4.89bn) for the year, which was up 24% on the previous year. Net income came in at 4.2 billion Swedish krone, which is up 22% on 2023.
Barclays (BARC.L) analysts said in a note released on Wednesday that European banks represented a "sweet spot" despite some risks, having performed well year-to-date.
They attributed the sector's performance so far this year to a number of factors, including the fact that it is not directly exposed to trade tariff risk and that political risk in France and Germany had diminished.
One European banking stock they had an "overweight" rating on was BNP Paribas (BNP.PA), which is up 26% year-to-date.
"We expect BNPP earnings to grow more than the sector average in 2025-27, driven by superior revenue growth ... and cost control," they said.
In addition, they said that BNP Paribas shares were among the cheapest in its European banks coverage.
UK bank Lloyds was another stock in the sector that Barclays (BARC.L) analysts had given an "overweight" rating.
"In our view, Lloyds offers some of the strongest fundamentals across European banks," they said.
The FTSE (^FTSE)-listed bank recently reported a 20% drop in its annual profits, as it set aside additional funds for potential motor finance payouts.
"Motor finance is a near-term overhang, but we see sizable downside protection in the shares, including from a bolstered £1.2bn provision," they added.
The analysts said the bank looked set to see approximately 65% earnings per share growth by the end of 2027, driven by a sharp acceleration in revenue growth into 2026 and beyond.
These examples of European stocks that are performing well so far this year reflect efforts to diversify amid volatility in US Big Tech.
Russ Mould, investment director at AJ Bell, said: "The UK and European equity markets do not have as much technology as the American ones, but they are packed with industrials and capex plays like defence stocks and cyclicals, while the FTSE 100 (^FTSE) offers a lot of exposure to miners and oils.
"Plus, UK and Europe are just less highly valued and expectations are lower, thus have more downside protection should anything go wrong."
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