Market Wrap: European Indices Set New Highs
Date: February 18, 2026
Overview
European stock markets have continued their strong rally, with major indices reaching fresh record highs. This upward momentum is primarily driven by optimism surrounding corporate earnings, a decline in inflation rates, and a capital rotation towards cyclical sectors.
Key Indices Performance
- EU50: 6075.6 (+0.58%)
- UK100 (FTSE 100): 10626 (+0.85%)
Sector Highlights
The Stoxx Europe 600 index has gained 0.60%, reaching new record levels, with defense and banking stocks leading the charge. Notable performances include:
- BAE Systems (BA.UK): Shares rose by 3.50% following the announcement of record profits and a significant order backlog.
- Rolls-Royce (RR.UK): Shares increased by 2.70%, reflecting investor confidence in the aerospace and defense sectors.
Additionally, banking and financial stocks have rebounded, contributing to the overall positive market sentiment, alongside gains from commodity and energy companies.
Economic Indicators
In the UK, consumer inflation has decreased to 3.0% in January, the lowest level in nearly a year, which has alleviated some cost-of-living pressures. This decline has bolstered expectations that the Bank of England may initiate interest rate cuts as early as March 2026, with current market pricing indicating a 90% probability of such a move.
However, the UK unemployment rate has risen to approximately 5.2%, the highest in five years, further supporting the case for monetary easing.
Geopolitical Context
Investors are closely monitoring geopolitical developments, including ongoing peace talks between Ukraine and Russia, as well as US-Iran negotiations regarding the nuclear program, which are influencing the broader macroeconomic risk landscape.
Market Reactions
The euro has experienced a slight decline following reports that ECB President Christine Lagarde may resign before the end of her term, introducing uncertainty into the market.