November 5 - European stocks climbed above their previous record closing high, extending their recent outperformance against global markets. The pan-European Stoxx 600 index gained 0.5%, surpassing its August peak, led by mining and consumer staples shares. The rally was driven mainly by two factors: a rotation by investors away from AI trades into defensive sectors, and a strong earnings season. The resolution of U.S. midterm election results helped restore market risk appetite, and the index also posted sharp gains on Wednesday. International oil prices falling back below $100 per barrel provided further support for European equities. Since early October, the pan-European benchmark has outperformed the MSCI All Country World Index and is on track for its best relative quarterly performance since the first quarter of 2025. As the AI trading frenzy fades, capital has flowed into defensive sectors such as healthcare and consumer staples, benefiting European markets. Market attention will subsequently shift to the potential impact of the U.S. midterm election results on the Iran war and tariff policy, and to whether U.S. policy adjustments can boost the renewable energy sector and may put pressure on AI trades.