LONDON: A US$93bil plunge in Novo Nordisk A/S shares has provided the latest blow to Europe’s largest listed companies, which have spent another year struggling in vain to match the returns of Wall Street’s biggest stocks.
While the top 10 US stocks have notched double-digit returns in 2024, powered by the so-called Magnificent Seven, six of Europe’s biggest names are in the red.
They include Ozempic maker Novo, whose gains for the year were fully erased in last Friday’s sell-off, as well as Nestle SA and LVMH Moet Hennessy Louis Vuitton SA.
All that has put the Stoxx Europe 600 index on course for its worst performance relative to the S&P 500 in almost a quarter of a century.
And a basket of sector-dominant European stocks compiled by Goldman Sachs Group Inc has fared even worse, lagging the Stoxx for the first time since 2017.
“To a large degree, the Magnificent Seven carried the S&P 500,” Morningstar strategist Michael Field said. “It’s not like we don’t have big companies in Europe, but the scale difference is so huge.”
European heavyweights suffer two disadvantages.
One, as Field pointed out, is size. Goldman’s large-cap basket – dubbed the GRANOLAS – is cumulatively worth some US$2.5 trillion, while the Magnificent Seven have added about US$5 trillion this year alone, taking their combined value past US$16 trillion.
Second, the so-called old economy stocks dominated European large-cap ranks. The 11-member GRANOLAS basket contains only two tech-related names, SAP SE and ASML Holding NV.
Sectors such as autos, industrials and miners are usually heavily exposed to the ebb and flow of economic cycles.
Luxury stocks, for instance, have been hit hard by China’s consumer slowdown, while at Nestle, faltering sales growth has put shares on track for their worst year on record.
“There’s a fundamental structural issue in Europe in that it doesn’t have global champions really, and it certainly doesn’t have global champions in the hottest part of the market – technology and artificial intelligence,” said Guy Miller, chief market strategist at Zurich Insurance Co.
There are some signs of unease over the Magnificent Seven’s blistering rally, and their dominance of benchmarks. — Bloomberg
