Stock markets in Europe and the United States have closed out their best quarter since 2020, with technology and artificial intelligence driving the gains. Yet the strong headline masked a sharp divide between winners and losers, and in the United Kingdom the FTSE 100 struggled to keep pace with its continental peers, held back by the parts of the market that fell out of favour.
For European equities as a whole, it was the strongest three-month stretch in over half a decade. The rally was underpinned by the momentum around technology and AI, themes that have increasingly come to dominate global markets and that powered a broad advance across many sectors during the April-to-June period, lifting benchmark indices to notable quarterly gains.
The clear weak spot was energy. As oil prices fell sharply, oil and gas stocks took the brunt of the selling, dragging on indices with heavy exposure to the sector. Shares in BP and Shell, two of the biggest names in the industry, both sustained heavy losses over the quarter, standing out against the wider market's upward trend.
That damage was felt most acutely in London. BP ended the period as the worst-performing stock on the UK's benchmark FTSE 100, a reflection of how heavily the slide in oil weighed on the company. Because the FTSE carries a comparatively large weighting in energy, the index underperformed the broader European benchmark over the three months from April.
The pattern is a familiar one for the UK market, whose sector mix has repeatedly left it lagging behind continental peers during rallies led by technology rather than commodities. When the gains are concentrated in AI and tech names, an index tilted towards energy and other traditional sectors can find itself on the wrong side of the trade, as it did this quarter.
Beyond equities, there was some better news on the inflation front, with price growth across the eurozone's major economies slowing in June, offering a degree of respite for central bankers gathered at the European Central Bank's forum in Sintra. Taken together, the quarter told a clear story: AI remained the dominant force lifting markets, while energy weakness left the UK trailing, a dynamic investors will be watching closely as the second half of the year begins.