European stocks extended January’s strong performance last month, as investors continue to favor a region that’s underperformed in recent years. US indices failed to keep their momentum.
The STOXX® World AC lost 0.6% last month when measured in either US dollars or euros, and including dividends. The STOXX® Global 1800 index fell 0.5%.
The Eurozone’s EURO STOXX 50® rose 3.5% in euros on a total-return basis.[1] The pan-European STOXX® Europe 600 gained 3.4%, posting its best start to a year since 2019 in absolute terms, and best start since 2001 when comparing it against the STOXX® USA 500. The US benchmark fell 1.3% over the month, in dollars.
The STOXX® Asia/Pacific 600 slid 1% in dollars. The STOXX® Developed World dropped 0.7% while the STOXX® Emerging Markets was unchanged.
Figure 1: STOXX Equity World indices’ February risk and return
Figure 2: STOXX Benchmark indices’ February risk and return
Germany’s DAX® increased 3.8% in the month. MDAX®, which gauges the performance of German mid-caps, gained 5.9%.
Figure 3: DAX indices’ February risk and return
| For a complete review of all indices’ performance last month, visit our February index newsletter. |
Economy, geopolitics
Investor sentiment towards the U.S. and Europe took a somewhat different path in the month. Uncertainty around President Trump’s policies and their inflationary implications weighed on confidence in the country just as economic reports over the month showed signs of weakness. The Federal Reserve Bank of Atlanta’s GDPNow forecast on February 28 shifted to an annual contraction of 1.5% for the first quarter, down from 2.3% growth a few days earlier.[2]
In Europe, meanwhile, the prospect of a new German government that may cut taxes and lift spending, and the possibility of a resolution to the war in Ukraine, helped improve the general market outlook.
Figure 4: Total annual % returns for STOXX World AC index
Figure 5: Select STOXX benchmarks’ returns since 2023
Volatility rises
The VSTOXX® (EURO STOXX 50® Volatility), which tracks the price of EURO STOXX 50 options traded on Eurex, rose to 18.6 in February from 15.4 in January. A higher VSTOXX reading suggests investors are paying up for puts that offer insurance against stock price drops. The VDAX®, which measures volatility in German equities, climbed to 19.2 from 15.4 a month earlier.
Factor investing
Among the STOXX Factor indices, the Low Risk signal led gains last month, while Size trailed (Figure 6).
Figure 6: STOXX Factor (Global) indices’ February risk and return characteristics
Climate benchmarks
Within climate benchmarks, the ISS STOXX® Developed World Net Zero Transition rose 0.2%. The index is focused on net-zero targets and real-world transition-aligned metrics, and includes all industries featured in the parent universe.
The STOXX® Global 1800 Paris-Aligned Benchmark (PAB) fell 0.6%, as did the STOXX® Global 1800 Climate Transition Benchmark (CTB). The PAB and CTB indices follow the requirements outlined by the European Commission’s climate benchmarks regulation.
Sustainability indices
The STOXX® Global 1800 ESG-X index dropped 0.7% in the month. The STOXX® ESG-X indices are versions of traditional, market capitalization-weighted benchmarks that observe standard responsible exclusions.
The DAX® ESG Screened rose 3.6% in the month. The index reflects the composition of the DAX benchmark minus companies that fail to pass norms-based and controversial weapons screenings, meet minimum ESG ratings or are involved in certain business activities considered undesirable from a responsible investing perspective.
Within indices that combine exclusions and best-in-class ESG integration, the EURO STOXX 50® ESG 3.5% over the month. Germany’s DAX® 50 ESG index (+3.9%)[3], which excludes companies involved in controversial activities and integrates ESG scoring into stock selection, performed broadly in line with the benchmark DAX in the month.
The STOXX® Global 1800 SRI added 1.3%. The STOXX SRI indices apply a set of carbon emission intensity, compliance and involvement screens, and track the best ESG performers in each industry group within a selection of STOXX benchmarks.
Thematics, digital assets
Only 13 of 40 STOXX® Thematic indices outperformed the benchmark STOXX Global 1800 last month. The STOXX® Europe Luxury 10 index (+3.5%) showed the biggest gain in the set for a third straight month, while the STOXX® World AC NexGen Software Development index (-5.4%) led losses in the month.
The STOXX® Digital Asset Blue Chip index, which aims to track high-quality assets that represent the crypto universe today, plunged 28% in the month.
Dividend strategies
Dividend strategies had strong returns in the month that ended. The STOXX® Global Maximum Dividend 40 (+4% on a net basis) selects only the highest-yielding stocks. The STOXX® Global Select Dividend 100 (+2.5%) tracks companies with sizeable dividends but also applies a quality filter such as a history of stable payments.
Minimum variance
Minimum variance strategies also had strong returns last month. The STOXX® Global 1800 Minimum Variance rose 2.8% and the STOXX® Global 1800 Minimum Variance Unconstrained advanced 3.7%.
The STOXX Minimum Variance Indices come in two versions. A constrained version has similar exposure to its market capitalization-weighted benchmark but with lower risk. The unconstrained version, on the other hand, has more freedom to fulfill its minimum variance mandate within the same universe of stocks.
[1] Throughout the article, all European indices are quoted in euros, while global, North America, US, Japan and Asia/Pacific indices are in US dollars.
[2] Bloomberg, “Atlanta Fed GDPNow Sees Economy Shrinking After Friday Data,” February 28, 2025.
[3] Figures in parentheses show last month’s gross returns.