European Stocks Defy US Turmoil: Momentum Plays Surge as Tariff Threats Loom

If you’re looking for a market that’s thumbing its nose at US volatility, look east. European equities are staging a defiant rally, even as Wall Street’s software darlings get carted off the field and the Nasdaq 100 teeters on the edge of a technical abyss. While American traders are busy watching dip-buyers vanish and volatility sellers tempt fate, the real action is across the Atlantic, where bullish momentum is running hot. The question isn’t whether Europe can keep outperforming, it’s whether the party survives the next round of tariff threats and macro curveballs from Washington.

Let’s set the scene. US stocks are wobbling, with the software sector in full retreat and the Nasdaq 100 flirting with a major breakdown. Headlines are grim: “Dip-buyers go missing as software selloff slams stocks” (Reuters), “The Nasdaq 100 On The Edge Of A Major Breakdown” (Seeking Alpha). Yet, Benzinga reports “5 European Stocks with Strong Bullish Momentum,” and the tape doesn’t lie. European benchmarks are pushing higher, with sector leaders shrugging off the kind of macro noise that would have sent them reeling in 2022. The threat of new tariffs from the Trump administration is real, but for now, it’s background static. Traders are chasing momentum, and the bid is relentless.

The timeline is telling. Over the last 24 hours, US equities have been battered by a perfect storm: tech underperformance, political drama at the Fed, and a delayed jobs report that leaves everyone flying blind. In contrast, European stocks are climbing, with bullish flows into industrials, luxury, and even financials. The divergence is stark. US traders are on edge, but European desks are running net long and pressing their advantage. The macro backdrop is hardly benign, tariff threats, currency volatility, and the ever-present risk of a US-led risk-off move, but for now, the momentum is all one way.

Context matters. Historically, European equities have lagged the US, especially in tech-heavy bull markets. But 2026 is rewriting the script. With US valuations stretched and the AI bubble narrative wearing thin, European stocks are benefiting from a relative value bid and a rotation into “old economy” names. The euro is stable, inflation is moderating, and central banks are less hawkish than their US counterparts. The result? A market that’s attracting global capital, even as US investors fret about the next shoe to drop. Cross-asset flows are picking up: European ETFs are seeing inflows, and sector rotation is favoring cyclicals and exporters. The correlation with US tech is breaking down, and that’s a big deal.

The real story is the resilience of European momentum. While US traders debate whether to buy the dip or run for cover, European stocks are making new highs. The bullish thesis is simple: lower valuations, improving earnings, and a macro backdrop that’s less toxic than the US. The risk, of course, is that this outperformance is built on shaky ground. If the US sneezes, Europe will catch a cold. But for now, the flows are real, and the tape is strong. Traders are betting that Europe can keep running, at least until the next macro shock.

Strykr Watch

Technically, the key European indices are breaking out of multi-month ranges. The DAX is testing resistance near all-time highs, while the CAC 40 and Euro Stoxx 50 are pushing higher with strong breadth. Momentum oscillators are flashing overbought, but there’s no sign of exhaustion yet. The 50-day moving averages are rising, and support levels are holding. Watch for a pullback to the 50-DMA as a buying opportunity. Sector rotation is favoring industrials, luxury, and energy, with financials catching a bid as rates stabilize. Option flows are bullish, with call skew steepening and implied vols drifting lower. The risk is a sharp reversal if US markets roll over, but for now, the trend is your friend.

The bear case is obvious: if the US market cracks, Europe won’t be immune. Tariff threats from Washington could hit exporters, and currency volatility could sap momentum. But the setup is asymmetric. As long as US tech remains under pressure and European earnings hold up, the rotation trade has legs. The key risk is a macro shock that triggers a global risk-off move. Keep an eye on US data releases (now delayed), Fed policy headlines, and any escalation in trade tensions. If the tape turns, be ready to cut longs and flip short.

On the opportunity side, the play is to ride the momentum until it breaks. Buy pullbacks in leading sectors, use tight stops, and don’t overstay your welcome. For the bold, pair trades, long European cyclicals, short US tech, could juice returns if the divergence widens. Option strategies that capture upside convexity are attractive, especially with implied vols still subdued. If you’re late to the party, wait for a dip to the 50-DMA or a retest of breakout levels. The trend is strong, but don’t chase at the highs.

Strykr Take

Europe is the market’s contrarian momentum play. As long as US tech stays shaky and macro risks remain contained, the bid in European equities should persist. But don’t get complacent. The setup is bullish, but the exit door is small. Trade it with discipline.