European Stocks Climb as Investors Pivot to Defensive Sectors
European stocks rose on Tuesday, with defensive sectors such as health care and real estate outperforming as investors grappled with lingering worries about artificial intelligence. The Stoxx Europe 600 Index was up 0.4% by the close, reflecting a cautious yet optimistic market sentiment.
Banking and insurance stocks also gained ground, while miners faced the biggest losses due to a decline in metal prices. The energy sector took a hit as oil prices dropped, signaling potential progress in nuclear talks between the US and Iran.
Investors have been increasingly turning to European markets as a safe haven from the turbulence affecting American tech stocks and concerns that AI could disrupt the software industry. According to Bank of America Corp.’s latest fund manager survey, a growing number of investors believe that the structural underperformance of Europe’s equity markets is coming to an end.
Bank of America strategists, led by Andreas Bruckner, noted that a record 74% of investors anticipate European growth to accelerate in the near term, driven by German fiscal stimulus and improving macroeconomic data. The percentage of investors expecting a higher upside for European cyclicals over defensives is nearing a one-year high.
“Weak liquidity from the US long weekend and Lunar New Year creates a challenging technical backdrop, and heightened geopolitical risks have added to market concerns,” said Emma Moriarty, portfolio manager at CG Asset Management. “However, expectations of easier global financial conditions suggest that operating conditions might be turning more favorable for European companies.”
In the UK, the FTSE 100 Index increased by 0.8% as the pound weakened following economic data showing the unemployment rate reaching a near five-year high. This made UK exports more attractive, boosting the export-heavy FTSE 100.
Aroundtown SA, a real estate company, saw its stock jump by 4.8% after Viceroy Research highlighted it as a deeply undervalued investment. Conversely, copper miner Antofagasta Plc’s shares fell by 3.4% due to underwhelming earnings and dividend reports from some analysts.
Kerry Group Plc, an Irish food producer, experienced a significant decline of 6.4% as it reported below-consensus volume growth in the EMEA and APAC markets, compounded by adverse exchange rate movements.
These market dynamics underscore the ongoing shift in investor sentiment towards more defensive and stable sectors, as the global economic landscape continues to evolve amid technological and geopolitical uncertainties.
For more insights on equity markets and European stocks, stay tuned for further updates and analysis.
