AI trading turmoil suppresses US stocks! European stocks rise against the trend, becoming a new safe haven for global capital.

Recently, the global stock market has shown significant differentiation. Against the backdrop of fierce volatility in AI-related trading impacting the US stock market, European markets have managed to break through despite the trend. Citigroup strategists have noted that in recent weeks, European stock markets have become the only region among major global markets to see a significant improvement in risk appetite, primarily driven by incremental capital inflows and better-than-expected corporate earnings. In a report, Citigroup strategist David Chew stated that last week, the sentiment for holdings in European benchmark indices globally warmed up comprehensively, while the indicators for the US market showed weakened confidence. In Asia, concerns related to AI have led to significant differentiation in market holdings, with the Korean benchmark index already entering deeply bearish territory. Chew said, Throughout July, the holdings in the European Stoxx index remained exceptionally stable, in stark contrast to the more drastic adjustments in positions for major US indices, highlighting that Europe is relatively less affected by AI-related risks. Current position allocations remain robust and have not fallen into euphoria. The strategist pointed out that the European Central Bank's decision to keep interest rates unchanged has also boosted the European markets, while the overall performance of the earnings season has exceeded market expectations. Data shows that profits of constituents in the Stoxx 600 index surged by 19% year-on-year in the second quarter after nearly two years of stagnant growth. The impact of profit growth on the European stock market is greater than that on the US stock market. In addition to favorable macroeconomic and fundamental conditions, capital market behaviors have further propelled European indices upward. Chew underscored that part of the reason for the recent rise in the German DAX index is due to short squeezing, where investors are covering their previously bearish positions in the market. He stated, A significant portion of the short positions are currently in the red. If the upward momentum continues, this index could easily be affected by further short covering. Amid the turbulent AI market, the robust fundamentals and relatively minor disturbances in the European markets have garnered the attention of capital. Amelie Derambure, a senior multi-asset portfolio manager at Europes largest asset management company, Amundi, recently revealed, We reduced our exposure to the US ahead of the earnings season and shifted some positions to Europe. We are uneasy about the excessive concentration and weighting in AI themes while anticipating that Europe can fulfill its high profit expectations and indeed it has. Last week, the Stoxx 600 index in Europe rose by 0.7%, accumulating nearly 5% since early June. Meanwhile, the S&P 500 index remained roughly flat during the same period.