Friday 30 September 2016

ISEQ among top world performers as European stocks eclipse US

Published 02/01/2016 | 02:30

Traders work on the floor of the New York Stock Exchange in Manhattan on New Year’s Eve as US stocks declined, with the Standard & Poor’s 500 Index losing its grip on a fourth consecutive annual gain in the year’s final trading session
Traders work on the floor of the New York Stock Exchange in Manhattan on New Year’s Eve as US stocks declined, with the Standard & Poor’s 500 Index losing its grip on a fourth consecutive annual gain in the year’s final trading session

Ireland's ISEQ Index was one of the best performing in the world last year, outstripping major indices including the UK's FTSE 100 and Germany's DAX.

  • Go To

Overall, European stocks accomplished something they've done only once in five years - beat their US counterparts.

The ISEQ ended 2015 up 30pc on the same period last year.

This compares with the German Dax, which was up 9.56pc; France's CAC 40, up 8.53pc; the S&P 500, which fell 0.73pc; and Japan's Nikkei, which gained 9.07pc. London's FTSE 100 lost 4.93pc over the year.

Elsewhere, the Stoxx Europe 600 Index rose 6.8pc last year, less than half its average annual return since global equities bottomed in 2009 and falling short of the 14pc gain forecast by banks and brokerages a year ago.

At the same time, viewed against what was available in equities elsewhere, it was the best showing in a decade.

"It's a decent return for a difficult year," said Thomas Thygesen, SEB's head of cross-asset strategy in Copenhagen.

"Timing is always important, but last year especially so. If you joined Europe's rally from the onset, you did well, but if you came late to the party, you've probably gained very little."

Meager gains may be good enough in 2015, with the Standard & Poor's 500 Index concluding the year down almost 1pc for its first annual decline since 2011.

And rallies exceeding 8pc for benchmark indices in France, Germany and Italy look downright impressive when compared with the 2.7pc retreat in MSCI's gauge of developed country stocks or the 17pc plunge in its emerging markets gauge.

It's only compared with what might have been, that European equities - and the predictions of regional forecasters - disappoint.

The Stoxx 600 surged 16pc from January through March - the best quarterly return since 2009 - as the European Central Bank flooded the financial system with cash by purchasing bonds. The index then spent most of the first six months sitting on gains of 15pc or more.

Progress sputtered in the second half, with the index falling 75 points from its April high to a low of 339.23 amid concerns that the region's recovery would be interrupted by crises in Greece and China and the Federal Reserve's first rate hike in almost a decade.

Along the way came volatility. Since April, the size of daily moves in the Stoxx 600 has widened by more than 40pc, averaging 1pc a day on a closing basis.

Although European shares were comparatively stable while the S&P 500 plunged 11pc from August 17 to August 25, their peak-to-trough swing of 18pc from April to September compares with an 11pc lurch in American equities.

The upside of the swoon is that valuations for the Stoxx 600 have returned to February levels, before the ECB began buying government bonds. As a result, European stocks are trading at a discount of more than 9pc to their US peers, at 16 times projected earnings.

The Stoxx 600 fell 5pc last month, second only to a 9.3pc drop in 2002 as the worst December on record. (Additional reporting Bloomberg)

Irish Independent

Read More

Promoted articles

Editors Choice

Also in Business