EU Equities Fell on Lower Output and France’s Debt Downgrade
Global Equities Fell on Downgrades and Lower Output
EU equities fell
EU (European Union) equities fell in the week ended September 25, 2015. The MSCI Europe Index fell 1.62% and the United Kingdom’s markets fell the least by 0.08%. Germany’s DAXK and France’s CAC 40 fell by 2.30% and 1.22%, respectively.
Eurozone economic activity grew slowly in September with Markit’s composite PMI falling from 54.1 in August to 53.9. The decline, due to weakness in China, was lower than expected. However, new orders for the region reached a five-month high, and businesses hired workers at the fastest pace in three quarters.
Moody’s Investors Service downgraded France’s long-term sovereign debt to Aa2, but with a stable outlook. The downgrade was due to low growth rate, continued higher entitlements, and weaker political will to reduce debt.
EU equities (EFA) outperformed other major markets in 2015. On a YTD (year-to-date) basis, Germany’s DAX fell 3.64%, France’s CAC 40 rose 4.87%, and the United Kingdom’s FTSE fell 6.96%.
Impact on asset managers
The competitive quantitative easing (or QE) between Japan, China, and the Eurozone is mainly to fuel growth through exports. These exports are primarily targeted toward North America. The European Commission expects 1.50% GDP growth in 2015, partially due to QE and reforms. The growth in 1H15 was in line with the European Commission’s expectations. The Eurozone grew 1.60% in 1Q15. However, growth in 2Q15 slowed to 1.50%.
Germany’s Volkswagen was caught in a scandal over fraudulent emission tests, which led to a decline in stock prices by 18% and the resignation of CEO Martin Winterkorn. The scandal could grow to include other German manufacturers.
Stock market performance is one of the key drivers for asset managers’ revenue. Major asset managers in the Eurozone include Goldman Sachs (GS), BlackRock (BLK), Morgan Stanley (MS), Deutsche Bank AG (DB), and UBS Group (UBS).
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