In recent years, countries all over the world have implemented the policy of low policy interest rate, which is likely to evolve into a "dangerous undercurrent", which has a certain impact on the capital market and even the economic and social development. This paper first introduces the development status of low interest rate environment in the world, and then employs the pricing model to theoretically deduce the impact mechanism of the low interest rate environment on the stock market. Besides, the panel data of 25 European countries are adopted to conduct an empirical test via System GMM model and fixed effect model. The empirical results show that there is a negative correlation between interest rate and stock price, that is, if the direction of interest rate changes, the rise and fall of stock price may change in the opposite direction. Finally, according to the conclusion of the empirical study and the development status of China, this paper puts forward some policy suggestions.