European Stocks Rise as Oil Prices Drop and Euro Zone Activity Accelerates

European equities trended upward this week, with the STOXX 600 rising on Monday and Wednesday. The recovery followed a sharp sell-off on the previous Friday after Saudi Aramco halted European crude allocations due to strikes on its East-West pipeline. Market sentiment improved as oil prices declined for six consecutive sessions, aided by the decision by the Government of Saudi Arabia to restart operations at the key pipeline.

Economic data provided further support on Wednesday, as an S&P Global PMI survey showed euro zone business activity accelerated at its fastest pace in over three years. Technology and banking shares led the gains, while travel and airline stocks climbed alongside falling energy costs. However, individual corporate volatility persisted, with Arcadis shares falling 7% after WSP Global withdrew a takeover bid and KWS shares dropping 8% after missing sales estimates.

Political instability emerged in Germany, where Chancellor Friedrich Merz's Christian Democratic Union suffered its worst state election performance since 1949. The Alternative for Germany was projected to be the largest party in the northeast, raising concerns over the stability of the governing coalition. Meanwhile, investors remained cautious ahead of scheduled appearances by European Central Bank officials Christine Lagarde and Piero Cipollone, and a high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping to discuss trade and AI safety.