The prospect of a ceasefire in Ukraine is adding a peace premium to an extraordinary start to the year in European markets.

Already, very much against the consensus, Europe has been the standout trade of 2025. Germany’s Dax has been breaking records, as has the pan-continental Euro Stoxx index. Whether you are measuring in sterling or euros, or converting to dollars, the percentage gains in many European markets are well in to double figures this year, trouncing the supposedly mighty US. Even the UK’s normally laggard FTSE 100 beats the US S&P 500. At the risk of making you feel old, this has been one of the strongest beginnings to any year in the region since 1987. 

What has been missing here, though, is any sense of enthusiasm. The rally has been largely unloved, reflecting the absence of bad news — no across-the-board trade tariffs from Donald Trump (yet), and no serious blow-ups in the global government bond markets (also yet). It is a catch-up that also points to a mild case of nerves around highly concentrated, tech-heavy and politically charged US stock markets.