Latest / The European Economy Podcast with Fexingo: ECB, Eurozone, and Continental Markets / Why Eurozone Tech Stocks Are Surging in 2026
Transcript
- Lucas: If you'd told me at the start of this year that Eurozone tech stocks would be the hottest trade in June 2026, I'd have asked what you were smoking. But here we are — the EZU, the broad Eurozone ETF, is up nearly 5% in just the last five trading days. Luna: And Spain's EWP — up over 6.5% in the same period. That's not just a bounce. That's a rotation. Lucas: Exactly. And look, if walking through the economy with us has helped make sense of a trend like this — well, this show stays ad-free because listeners chip in. If you find value in these conversations, you can support us at buy me a coffee dot com slash fexingo. It's a simple way to keep the podcast independent. Back to the rotation — what's driving it? Luna: Yeah, I want to dig into that. The ECB just hiked rates for the first time since 2023, and that usually hurts stocks. But tech is rallying. Lucas: Conventional wisdom says rate hikes are bad for growth stocks. But the context matters. This hike — last Thursday — was driven by an energy shock tied to the Iran situation. The ECB had to act because consumer prices hit 4.2% annually in May, the highest in three years. Luna: So inflation is back, and the ECB is catching up. But how does that boost tech? Lucas: Two channels. First, the euro strengthened. We're at $1.16 per euro now, up from $1.15 a week ago. A stronger euro makes Eurozone assets more attractive to global investors, especially if they think the dollar is peaking. The trade-weighted dollar index is down to 119.5 from 120.1. Luna: So there's a currency play — buy European stocks, benefit from both the stock gain and the currency appreciation. Lucas: Exactly. The second channel is a rotation out of US mega-cap tech into European tech. US tech has been priced for perfection. European tech was relatively cheap. When the ECB hiked and signaled more to come, money started moving. Luna: And it's not just any European tech. The rally is concentrated in semiconductors and green tech. ASML, the Dutch lithography giant, is up 8% this week alone. Lucas: ASML is a perfect example. They have a near-monopoly on the machines needed to make advanced chips. The EU's Chips Act is funneling billions into domestic semiconductor production, and ASML is the bottleneck. That's a structural story, not a cyclical one. Luna: And then you have the Iberian component. Spanish stocks in the EWP are up over 6% — that's partly tech, partly renewable energy software firms that are benefiting from the EU's green transition. Lucas: Right. Spain and Portugal have become hubs for solar and wind software, energy management platforms. Those companies are seeing revenue growth that's outpacing the broader economy. And the broader economy is actually solid — real GDP growth annualized at 1.6%, up from 0.5% at the start of the year. Luna: So the macro backdrop is supportive. But I wonder: is this rally sustainable? Or is it just a temporary haven from US volatility? Lucas: That's the million-dollar question. The bull case: European tech is undervalued relative to US tech, the euro has room to run if the ECB keeps hiking, and the structural tailwinds from Chips Act and green investment are real. The bear case: this is a reflex rally — money fleeing US uncertainty, not a fundamental re-rating. Luna: And if the Iran conflict escalates further, energy costs could spike again, which would hurt European manufacturers and potentially curb the tech rally. Lucas: Exactly. The wholesale price index in the US already showed a 1.1% monthly jump in May, driven by energy. If that feeds through to European input costs, margins get squeezed. But for now, the market is betting that the ECB's rate hike will contain inflation without crushing growth. Luna: And the data supports that — at least for now. GDP is growing, the euro is stable. But it's fragile. Lucas: Very fragile. I'd be watching the US dollar index closely. If it stabilizes or reverses, some of the currency-driven flows could unwind. But if the dollar continues to weaken, European tech could have more room to run. Luna: So for our listeners who want to play this trend — what's the smart way? EZU for broad exposure, or something more targeted? Lucas: EZU gives you the broad market, which includes banks and industrials. If you specifically want tech, there are sector ETFs. But the beauty of this rally is that it's lifting a lot of boats. Even old-economy stocks are benefiting from the stronger euro and improved sentiment. Luna: It's a reminder that Europe isn't just about luxury goods and carmakers anymore. The tech ecosystem is real. Lucas: Absolutely. And it's being driven by policy and necessity, not just hype. That makes it more durable, in my view. But we'll see how the next few weeks play out. Luna: Well, we'll be watching. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to our listeners. If you want to support the show, you know where to find us — buy me a coffee dot com slash fexingo. We'll be back tomorrow with another angle on the European economy.