{"id":1454024,"date":"2024-01-30T07:45:00","date_gmt":"2024-01-30T12:45:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1454024"},"modified":"2024-01-30T07:45:00","modified_gmt":"2024-01-30T12:45:00","slug":"europes-own-tech-stars-are-leading-index-to-record","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/europes-own-tech-stars-are-leading-index-to-record\/1454024\/","title":{"rendered":"Europe’s Own Tech Stars Are Leading Index To Record"},"content":{"rendered":"

Europe’s Own Tech Stars Are Leading Index To Record<\/span><\/p>\n

\n

By Michael Msika, Bloomberg Markets Live reporter and strategist<\/em><\/p>\n

The Euro Stoxx 50 Index\u2019s multi-year transformation, led by the emergence of tech champions, may finally set the region\u2019s benchmark on course toward a new high.<\/p>\n

Europe may lack a \u201cMagnificent Seven\u201d tech cohort of its own, but a pared-down version of that phenomenon has emerged.<\/strong> The Euro Stoxx 50 has just hit its highest since 2001, with the latest leg of the surge powered by blowout earnings from the region\u2019s two biggest tech stocks,\u00a0ASML\u00a0and\u00a0SAP<\/strong>. And that hasn\u2019t even made the benchmark expensive.<\/p>\n

With its forward price-to-earnings ratio just below 13 times, the Euro Stoxx 50 is still relatively cheap, trading at 35% discount to the S&P 500 Index<\/strong>. What\u2019s more, the latest phase of the rally has done little to increase valuations, suggesting that the gains have been driven by stronger earnings. Easing price pressures and looming interest-rate cuts should help too.<\/p>\n

\u201cThe valuation of European equities remains very attractive,\u201d said Indosuez Wealth Management portfolio manager\u00a0Laura Corrieras. \u201cWhile the level of unemployment has remained stable, disinflation continues at a faster-than-anticipated pace and more and more investors now expect the European Central Bank to reduce its rates in 2024.\u201d<\/p>\n

<\/a><\/p>\n

There is still a way to go before making new records: the Euro Stoxx 50 remains about 15% short of its peak. But ASML and SAP now account for almost 15% of the benchmark, the latest sign of how the index, once dominated by oil majors and banks, has radically changed.<\/p>\n

The nadir for the index came in March 2009. Since then, more than 50% of its ascent can be attributed to just five names: ASML, LVMH, SAP, Siemens and TotalEnergies. Just ASML and LVMH alone have generated nearly 27% of the benchmark\u2019s return, with ASML joining the index only in 2012. <\/strong>The chip equipment company\u2019s market value soared to nearly \u20ac320 billion ($347 billion) from around \u20ac6 billion in 2009, while that of LVMH\u2019s increased by 20-fold during the same period.<\/p>\n

A glance back to March 2000 shows that telecom stocks, along with\u00a0Nokia, were the investor favorites then, accounting for about 28% of the index. \u00a0When the internet bubble burst and flushed out those names, oil and banking stocks stepped up to carry the baton of market dominance<\/strong>. By July 2007, the index was highly diversified, with no stock exceeding 6% in weighting.<\/p>\n

The global financial crisis spurred progressive change in the blue-chip benchmark, but financials have largely survived to be the biggest industry group, at nearly 20% today. They are now challenged by consumer discretionary, industrial and tech stocks, each at about 17%.<\/p>\n

<\/a><\/p>\n

Still, there may be bumps along the road to a record. For one thing, Europe\u2019s heavy reliance on China links its fortunes to those of the world\u2019s No. 2 economy.<\/p>\n

\u201cWe think Europe is a top pick to play the China story in the developed market space, providing a wide range of cyclical exposure,\u201d Citigroup strategists led by\u00a0Beata Manthey\u00a0wrote in a note last week. Investors may prefer to use European stocks as a proxy for China, rather than taking direct exposure, even as government measures to boost the economy improve sentiment. \u00a0<\/p>\n

The euro-area benchmark remains highly international, with less than a third of its members\u2019 revenue generated within the euro area. It\u2019s 37% exposed to broader Europe, 22% to North America, 25% to Asia and 16% to emerging markets, according to Goldman Sachs strategists.<\/p>\n

<\/a><\/p>\n

\u201cEurope remains a good source of diversification from the concentrated valuation risk in US equities which, even excluding the Mag 7, do not reflect the higher-for-longer environment,\u201d said Bernstein strategists\u00a0Sarah McCarthy\u00a0and\u00a0Mark Diver.\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nTue, 01\/30\/2024 – 02:45<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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