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Europe powers ahead in 2021 as banks and carmakers beat tech
Despite a troubled vaccine rollout programme in both countries, Germany’s DAX 30 and France’s CAC 40 have been the stock market stars on the global stage so far in 2021 as investors move away from tech stocks and into cheaper industrial names.
A 9.4% first quarter rise in the DAX has led it to hit all-time highs thanks to its significant weighting towards banks and carmakers, with the latter particularly causing excitement among investors as a cheaper alternative to Tesla.
Some of the biggest names in the DAX include BMW, Mercedes-Benz maker Daimler and Volkswagen, three car manufacturers that have seen big gains year-to-date as they transition towards electric vehicles.
Volkswagen in particular has shone with a 62% gain to €239 year-to-date, with the shares soaring after its Tesla-like ‘Power Day’ where it unveiled grand plans to investors for a big push into electric vehicles.
France’s CAC 40 has also had a standout quarter with a 9.3% gain despite a third wave of coronavirus infections in the country and another national lockdown, thanks to both unexpected rises in French consumer confidence and the rise in bond yields, which investors think will be good for its banking stocks. The likes of AXA, BNP Paribas, Crédit Agricole and Société Générale make up a significant chunk of the index.
Away from Europe, Japan has been the next best performing developed market with a 6.3% first quarter gain from its benchmark Nikkei 225 index, as the country’s vaccine rollout gathers pace and continued monetary and fiscal stimulus reassures investors.
In the US, improving sentiment over an economic recovery and various stimulus plans including on infrastructure from the Biden administration have helped the Dow Jones and S&P 500 record strong quarters, while the tech-heavy Nasdaq has lagged behind with investors rotating into industrials and financials as cheaper options for earnings growth.
On the home front, the FTSE 100 has had an underwhelming first quarter with a 3.9% gain, one of the lowest among the world’s major stock markets, having been held back by its miners and oil companies, which make up a big chunk of the index. Chinese stocks, lauded by global investors for their multi-decade growth potential, have not done well in the short-term and are down this year as rising regulation, a crackdown on Chinese firms with overseas listings and more tensions with the US all dampen sentiment.