Euro Stoxx 50 Enters Bear Market as Hope for Year-End Rally Vanishes

The Euro Stoxx 50 entered a bear market Thursday as a rally in U.S. stocks fizzled, dashing hopes for a year-end rebound in European shares.

The benchmark for stocks in the euro region initially gained as European markets re-opened after the Christmas break, encouraged by the biggest U.S. rally since 2009 on Wednesday. The optimism lasted a mere hour before markets retreated into the red, weighed down by losses in U.S. futures. The gauge closed 1.2 percent lower.

The benchmark, which flirted with the level last week, closed at 2,937.36, down 21 percent from a peak in November 2017, following other European indexes including Germany’s DAX and Italy’s FTSE MIB which closed in bear territory this year. The broader Stoxx Europe 600 benchmark also edged closer to a bear market with Thursday’s close only about 2.2 percent away.

“My medium-term view hasn’t really changed since the weekly chart broke to new lows a couple of weeks ago, with the resulting bearish setup suggesting more downside and offering resistance to any rally,” said Andy Dodd, technical analyst at Louis Capital Markets in London.

The benchmark, home to the 50 biggest companies in the euro area by market value including drugmaker Sanofi, luxury-goods company LVMH and industrial conglomerate Siemens AG, is headed for its worst year since 2011, bringing a six-year winning streak to an end. A trade war between China and the U.S., slowing momentum to the economy and earnings, as well as political risks from Brexit to Italy and France have all weighed on European stocks this year.

Among the index’s worst performers are several German companies such as Bayer AG, which is facing legal trouble following its acquisition of Monsanto, and Deutsche Post AG, the global logistics company. Banks are the second-biggest single group in the index and set to become the worst-performing sector in Europe this year. ING Groep NV, BNP Paribas SA, Banco Bilbao Vizcaya Argentaria SA and Societe Generale SA also feature among the laggards, with Deutsche Bank AG shedding so much market value that it was removed from the gauge in September.

Bloomberg

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya