Market Musings 091223: Breakouts
Stock market momentum maintained into December
Summary
European stock markets break to new multi-year highs
Italy, Spain, Germany in the lead
Leading sectors: Insurance, Banks, Tech, Retail
Europe breaks out, other markets hesitate
As we edge towards the Santa rally period (December 11 - January 5), it is a good time to step back and identify the current momentum winners.
The UK stock market may have suffered less than other markets in 2022, but it continues to languish in 2023 with the FTSE 100, 250 and AIM indices all exhibiting a clear lack of momentum.
In contrast, the eurozone displays relatively robust upwards momentum in site of the lack of economic growth in Germany, France and elsewhere in the 27-country union.
Just look at the following list of national stock markets that have not only done well over November, but that also break new multi-year highs along the way.
Within the eurozone, Italian (FTSE MIB index), Spanish (IBEX 35) and German (DAX index) large-caps have all continued their steady ascent since late 2022, in the process breaking new multi-year highs along the way.
Italian stocks lead over 2023
Source: tradingview.com
At a European sector level, Financial stocks (insurance companies, banks) have led the way, helped by higher short- and long-term interest rates which have boosted their profitability.
European Insurance, Bank sectors lead
Source:tradingview.com
Remember - the chart above only shows price returns. For the full picture, we should then also add the impact of dividends paid out over the year, which then adds another 5-6% in income return.
It also pays to zoom out to see the longer-term chart, which is somewhat less impressive.
Euro STOXX 50 and Euro Banks still watching up to 2007 pre-Financial Crisis highs
Source: tradingview.com
Which stocks out of the Euro Financials sectors are leading?
Italy: Intesa SanPaolo, Unicredit, Generali
Spain: Santander, BBVA
France: AXA, Credit Agricole
Germany: Munich Re, Hannover Re
Aside from Banks and Insurance, two other leading sectors are Technology and Retail.
We should not be surprised at the…
