Europe Markets Weekly — 2026-05-08
European equities had a volatile week, surging to a two-week high mid-week on optimism that a U.S.-Iran peace deal was near, before pulling back Thursday as investors grew cautious awaiting concrete progress. Norway's central bank raised rates to curb inflation, adding a fresh hawkish note to the regional macro backdrop. Q1 corporate earnings for STOXX 600 companies are now tracking their best growth in three years, providing an underlying fundamental tailwind despite geopolitical uncertainty.
Europe Markets Weekly — 2026-05-08
Market Snapshot
- STOXX 600: Rose to a two-week high Wednesday before paring gains Thursday; broadly flat on the week
- DAX: Moved higher mid-week on peace deal optimism; gains tempered by Thursday pullback
- FTSE 100: Ended Thursday's session in the red, reversing earlier morning gains
- CAC 40: Tracked broader European moves, rising sharply Wednesday before pausing Thursday
Key Drivers
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U.S.-Iran peace deal optimism dominated sentiment mid-week, with European shares soaring to a two-week high on Wednesday after U.S. President Donald Trump cited "great progress" toward a comprehensive peace agreement with Iran. Oil prices fell sharply in tandem, providing relief for energy-importing European economies.
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Norway's central bank rate hike added a hawkish regional note on Thursday, helping drag the STOXX 600 into the red as investors reassessed the broader interest rate environment across Europe.
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Q1 earnings momentum underpinned market sentiment throughout the week. STOXX 600 companies are now on course for earnings growth of 10.2% year-on-year in the first quarter — the best performance in three years — based on results from 211 index members, providing a positive fundamental backdrop.
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EU energy security debate contributed to investor unease. EU Climate Commissioner Wopke Hoekstra called for a more radical response to energy crises driven by the Iran and Ukraine conflicts, arguing that homegrown energy production is the only sustainable path forward.
Earnings & Corporate
- Best Q1 earnings growth in three years: European blue-chips are on course for 10.2% year-on-year earnings growth in Q1 2026, based on data from 211 STOXX 600 companies that have already reported combined with market estimates for those pending. This marks a dramatic improvement from the 0.4% earnings decline recorded in Q4 2025 and a strong beat versus earlier analyst estimates of sub-3% growth heading into the season.
- Nokia surges over 100% YTD after U.S. company Inseego announced it would acquire Nokia's fixed wireless access business. Nokia shares closed 7.4% higher on the news, extending extraordinary year-to-date gains.
Geopolitics & Energy
- EU weighs suspending methane fines for oil and gas firms: The European Commission drafted plans to let oil and gas companies avoid penalties for breaching the EU's methane emissions law during periods of energy emergency. The proposal follows pressure from both the energy industry and the U.S. government, according to a draft document seen by Reuters.
- EU ministers to discuss expanding domestic gas drilling: EU energy ministers are preparing to discuss widening domestic gas production as geopolitical tensions, costly LNG imports, and dwindling supply options expose the bloc's growing energy vulnerability. The Iran conflict and continued Strait of Hormuz disruption remain the central supply-side risks driving this debate.
What to Watch Next Week
- U.S.-Iran peace deal progress: Any concrete announcement or breakdown in negotiations will be the dominant catalyst for European risk assets; oil price swings remain closely tied to deal prospects
- Remaining Q1 STOXX 600 earnings: With roughly two-thirds of the index having reported, final results from stragglers will determine whether the 10.2% growth rate holds
- ECB Annual Report 2025 and ECB communications: The ECB presented its Annual Report 2025 to the European Parliament this week; watch for follow-up guidance on the rate path given the stagflationary backdrop of 3% inflation and near-zero Q1 GDP growth
- EU energy ministers meeting: Discussions on expanding domestic gas drilling and the Commission's methane penalty suspension plan are expected to advance
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