Global hedge funds have been rapidly reversing their bearish positions on European stock markets, unwinding bets at the fastest pace seen in a decade amid a series of better-than-expected corporate earnings, according to a report by Reuters.

The report cites the prime brokerage desk at Goldman Sachs as writing in a client mote on Monday that in the two weeks leading up to 26 July, hedge funds significantly reduced both short and long positions in European markets, marking the highest rate of unwinding in about ten years.

The Goldman Sachs research note highlighted that hedge funds, which had been predominantly betting against European stocks, have now shifted gears, particularly focusing on closing short positions.

The most substantial net buying activity was observed in Europe, where funds closed short positions at twice the rate of long holdings. Despite recent mixed corporate earnings, Europe’s broadest stock index has gained about 7% for the year.

For instance, Mercedes-Benz saw its stock drop by about 3% on Friday after lowering its profit outlook. Conversely, Ray-Ban maker EssilorLuxottica surged 8% the same day, following news that Facebook parent Meta was considering purchasing a stake in the company.

Hedge funds unwound European stock trades daily for 12 consecutive days up to 25 July, coinciding with the STOXX index hitting a two-month intra-day low. Notably, Thursday saw the fastest pace of trade exits all year, driven predominantly by single-stock positions.

A recent Reuters analysis of the top 60 companies in the STOXX 600 index indicated that European companies have experienced an 18% increase in average daily stock movements over the past year compared to eight years ago, following earnings reports.

Stock trading hedge funds have returned 7.6% for the year up to July 26, while systematic equities traders have seen gains of 15.9%, according to Goldman Sachs.