European shares are enjoying their strongest start to a year since 2000 relative to US stocks, says Valerio Baselli on Morningstar. Over the past decade, capital has flowed from Europe to America in pursuit of better returns, but now the trend has reversed. European equity funds enjoyed €26 billion in net investment inflows in the first quarter, with this quarter set to be even better after global money managers were spooked by Donald Trump’s tariff drama in April. The pan-European Stoxx Europe 600 index has gained 6% this year, more than double America’s S&P 500.

A turning point came in March when German chancellor Friedrich Merz pledged to rip up the fiscal rules that have held back the continent’s largest economy since the Merkel era. The new government plans to borrow €500 billion to improve Germany’s creaking infrastructure, in addition to easing rules that have constrained defence spending. Berlin’s “astonishing reversal of fiscal policy” was greeted with elation, says John Authers on Bloomberg.