European stocks underperform the S&P 500 by the largest margin in 29 years

According to market analytics firm Barchart, European stocks are on the path to underperforming the S&P 500 on the hugest scale since 1995, marking the greatest margin between the two stock markets in 29 years. Bloomberg data confirmed this, indicating that the S&P 500 has skyrocketed by over 25% while the European Stoxx 600 has only managed 5%. 

Bloomberg’s analysis also highlighted that while European stocks have underperformed in the past, the range has never been to the current extent. The S&P 500 index has indicated the continued rally experienced by the U.S. stocks since Trump’s victory. The analysis highlighted that the victory boosted the appeal of U.S. stocks to the global financial community.

Notably, LSEG data showed that Stoxx 600 closed at a 2% loss on November 12, marking the lowest the index dropped since August. Most European company stocks followed suit, with mining stocks suffering the most at a 4% daily loss. However,  tech stocks inched slightly higher, attaining a 0.04% gain. 

Bourses across Europe also plunged on the same day, with France, UK, and Germany’s CAC 40, FTSE 100, and DAX losing 2.71%, 1.28%, and 2.06%, respectively. Aurubis, a German company, led the losses among European companies after losing 6%.

Germany suffers the most in the slump

ooofff

🇩🇪German industry sees worst slump in orders since 2009, institute says (DPA International) pic.twitter.com/mSgr9EvUkt

— Tracy Shuchart (𝒞𝒽𝒾 ) (@chigrl) November 11, 2024

German stocks are suffering the biggest hit among European stocks, as confirmed by Tracy Shuchart, CEO of Hilltower Resource Advisors LLC. The German industry has overall seen the worst slump since the global economic crisis in 2009. 

Shuchart cited a report from the Munich-based institute DPA International, which mentioned that over 41% of German companies lacked orders in October. Companies manufacturing basic metal, automotive companies, and chemical manufacturing have taken the biggest hit. 

Trump’s win has notably put a strain on the already stressed German economy and GDP. On Wednesday, the German Council of Economic Experts confirmed the possibility of next year. Jens Larsen, an executive of Eurasia Group, also told CNBC about the relationship between the U.S. and Germany, which could worsen the situation.

“It has ramifications for all of the euro zone and there is a connection, isn’t there, between the U.S. and Germany.”

–Jens Larsen, Director of global macro-geoeconomics at Eurasia Group

Larsen also speculated that the country might tweak some of its policies to handle the current economic pressure. The Eurasia Group exec specifically pointed out a tweak in the schwarze null.

The European market may suffer more under Trump’s proposed tariffs

During his campaign, Trump revealed a proposed change of the current tariffs in the country, even on U.S. allies. The tariff change suggested a 100% tariff requirement for goods passing through the Mexican border, a 60% tariff for goods imported from China, and a 10% tariff on all other countries. 

The tariff change might affect the European market more, with Bloomberg forecasting the region’s performance to be lower than the U.S.’s next year. The analysis from the financial website also hinted at a possible trade war between the U.S. and China. 

Pinebridge Investments’ global head of multi assets, Michael Kelly, mentioned to Bloomberg that Europe could be in the middle of the U.S.-China trade wars, further affecting the current strain on the region’s economy. Kelly also revealed that other countries that depend on their exports to China will also be caught up in trade wars.