European equities are suddenly a favorite of global investors. The STOXX 600, the benchmark index of European stocks, is trading at record highs. To illustrate the strength of the market, the index rose every day last week. Since the beginning of the year, European stocks have been up about 12%.

The major catalyst behind the positive momentum is much stronger-than-expected earnings growth. Analysts now expect earnings for the STOXX 600 to increase by about 21% for the June quarter. Just a few months ago, investors expected earnings growth of only 12%. Equity markets love upside surprises. Fiscal stimulus from the German government is a major contributor to the earnings surprises being generated by European companies. Germany has the largest economy in Europe and remains an important engine of growth for the continent.