Global Equities Sell-Off Continues as China's Economy Slows Down
EU equities fall
EU equities fell in the week ended September 4, 2015. The MSCI Europe Index fell 2.94% that week. UK markets fell the most by 3.28%, whereas Germany’s DAXK and France’s CAC 40 fell 2.53% and 3.25%, respectively.
The Eurozone’s business activity improved in the month of August. The final Markit Composite PMI (Purchasing Managers’ Index) rose to 54.3 in August, the highest since May 2011. European Central Bank president Mario Draghi said the central bank can increase its stimulus program in case of slowing growth.
The Eurozone’s economic growth is expected to be lower than previously expected. The ECB (European Central Bank) has modified its QE (quantitative easing) program to allow a higher percentage of each member country’s debt to be purchased.
However, UK manufacturing growth slowed in August, mainly due to the strong British pound, lower exports to the Eurozone, and China’s economic slowdown. The Markit manufacturing index fell to 51.5 in August compared to 51.9 in July.
European Union equities (EFA) outperformed other major markets in 2015. On a year-to-date basis, Germany’s Dax has fallen 0.16%, France’s CAC 40 has risen 5.86%, and the United Kingdom’s FTSE has fallen 7.97%.
Impact on asset managers
The European Commission expects 1.50% GDP (gross domestic product) growth in 2015, partially due to QE and reforms. First-quarter growth was in line with the European Commission’s expectations. The Eurozone grew 1.60% in 1Q15. However, growth in 2Q15 slowed to 1.3%, raising concerns about the declining impact of quantitative easing.
The earnings season for European equities was strong in 2Q15. Major companies in manufacturing, exports, and industrials beat analysts’ estimates and posted strong year-over-year growth in operations.
The 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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