The Thanksgiving Lull and the European Reality Check
Liquidity dried up across global desks yesterday as U.S. markets shuttered for the Thanksgiving holiday. This seasonal silence usually offers a reprieve; however, for European equities, the quiet has only amplified the sound of cracking foundations. While the previous narrative suggested a brief period of outperformance for the STOXX 600, the data landing on November 27, 2025, tells a far more aggressive story of structural stagnation. The gap between the S&P 500 and European indices is no longer a mere performance delta; it is a fundamental decoupling driven by high energy costs and a failure to scale the next generation of industrial technology.
The Rovelli Thesis vs. The November CPI Reality
Earlier this year, strategist Bruno Rovelli pointed toward European resilience. That optimism was rooted in a cooling inflationary environment that many hoped would allow the European Central Bank to lead the charge in rate normalization. The reality on November 28, 2025, is significantly grittier. Per the latest Eurozone flash CPI data released yesterday, services inflation remains stubbornly anchored at 3.8 percent. This stickiness prevents the ECB from providing the aggressive liquidity injection that equity markets have been pricing in since the summer.
Investors who pivoted to Europe seeking a value play are finding themselves in a classic trap. The discount at which European stocks trade relative to the U.S. has widened, but so has the risk profile. Unlike the U.S. tech-heavy growth, Europe remains tethered to a traditional industrial base that is struggling to navigate a permanent shift in global trade dynamics. The brief surges we saw in early Q3 were not a sign of a structural bull market, they were merely technical rebounds from oversold conditions.
Visualizing the November 2025 Volatility
To understand the current pressure on the STOXX 600, we must look at the daily price action leading up to this morning. The following data visualizes the index’s inability to maintain momentum even as U.S. pressure eased during the holiday break.
The High-NA EUV Delay and the Tech Sector Squeeze
ASML remains the undisputed king of the European tech landscape, yet its recent guidance update on November 26 has sent ripples through the sector. The bottleneck isn’t just demand; it is the execution of High-NA EUV (Extreme Ultraviolet) lithography at scale. As major clients in Asia and North America reconsider their capital expenditure timelines for 2026, ASML finds itself squeezed between geopolitical export restrictions and a slowing Moore’s Law. The company’s valuation, which many cited as a reason for European equity strength, is now being re-evaluated under a lens of lower-than-expected growth for the first half of next year.
Simultaneously, the renewable energy sector, once the darling of European ESG-focused portfolios, is facing a reckoning. Siemens Gamesa continues to deal with the fallout of legacy turbine defects. The cost of these warranties, coupled with high interest rates that make large-scale wind projects prohibitively expensive, has decimated the company’s margins. This isn’t a temporary dip; it is a fundamental flaw in the European green energy business model that relies on cheap credit that no longer exists.
The Currency Headwind and Export Fragility
The Euro’s relationship with the Dollar has further complicated the equity story. A weaker Euro typically supports exporters, but in the current environment of 2025, it has primarily served to import inflation through higher energy and raw material costs. European manufacturers are facing a double-edged sword: their products are cheaper abroad, but their production costs are skyrocketing due to the lack of cheap pipeline gas and a reliance on expensive LNG imports.
| Sector | Month-to-Date Change (%) | Primary Headwind |
|---|---|---|
| Technology (ASML) | -4.2% | Lithography Rollout Delays |
| Renewables (Siemens Gamesa) | -7.8% | Warranty Costs / Interest Rates |
| Financials | +1.1% | Higher Net Interest Income |
| Industrial Goods | -2.5% | Energy Input Costs |
Only the financial sector has seen a modest benefit, as per the Bloomberg European Bank Index, thanks to the ECB’s decision to keep rates higher for longer. However, this is a pyrrhic victory. Higher rates for banks mean higher default risks for the small and medium-sized enterprises that form the backbone of the European economy. We are seeing a rise in non-performing loans (NPLs) across Southern Europe as we approach the end of the year.
Structural Inertia vs. American Agility
The core of the issue lies in the lack of a unified capital markets union. U.S. companies can access a vast, deep pool of capital with ease. In contrast, European firms remain fragmented by national borders and varying regulatory frameworks. This was highlighted in the ECB’s Financial Stability Review published last week, which warned that the lack of private investment in technology is creating a permanent productivity gap. Without a radical shift in how Europe funds innovation, the temporary strength we saw in 2024 and early 2025 will remain an anomaly rather than a trend.
The next major milestone to watch is January 15, 2026, when the ECB will release its first policy statement of the new year. Investors should keep a close eye on the Eurozone labor market data scheduled for release in the third week of December. If wage growth does not cool significantly by then, the ECB will have no choice but to maintain its restrictive stance, further suffocating any potential for a 2026 equity rally.
