Growth & Tech Stocks Lead Gains at Start of Year

Our first markets barometer of the new year shows growth equities remain in favour after outperforming value through 2023

Fernando Luque 5 February, 2024 | 9:40AM
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European stock markets have had a slow start to the year, with the Morningstar Europe Net Return Index up 1.4% in euros in January. But this result hides sharp differences between sectors, factors and styles. 

Starting with factors, the Large Growth segment rose by 4.1% while Large Value declined by 0.6%. There were also differences between large and small companies, with the former gaining a combined 2.1% in January compared to 1.0% for the latter.

European stock factor heat map

Among large cap growth companies, the biggest contributors to January's gains were ASML Holding NV (ASML; +17.1% in euros), Novo Nordisk A/S (NOVO B;+11.0%) and SAP SE (SAP;+15.3%).

On the Large Value side, Deutsche Telekom AG (DTE; +4.6%), Volkswagen AG (VOW; +7.2%) or AXA SA (CS; +5.7%) rose strongly but could not offset losses in some of the companies that weigh more heavily by market capitalization, such as Shell PLC (SHEL; -3.3%), TotalEnergies SE (TTE; -1.2%) or Rio Tinto PLC (RIO; -4.3%).

At the sector level, there were large differences in performance in the first month of the year. The biggest gainer was the technology sector, rising 8.1%. We have already mentioned the strong performance of ASML Holding NV and SAP SE which contributed the most to the sector's performance, though Dassault Systemes SE (DSY), Capgemini SE (CAP) and ASM International NV (ASM) all rose by more than 9% in euro terms.

Another sector that did well in January was healthcare, thanks to Novo Nordisk, which is by far the European company with the largest market capitalization in the sector. Other contributors to the sector's strength were GSK PLC (GSK), up 9.8% in euros, Novartis (NOVN), up 5.1% and Sanofi (SAN), up 4%.

Among the sectors that suffered losses in January were utilities, led lower by RWE AG (RWE) and EDP Renovaveis (EDPR), which dropped by 16.6% and 18.8% respectively. Basic materials were also weak, with a decline of 3.4%. Glencore PLC (GLEN) fell by 9.5% in euros and BASF (BAS) by 8.9%.

European stock performance by sector

Regarding valuations, the trend remains the same: value is more attractive than growth and large companies are more expensive than smaller companies.

European stock valuations by sector & factor

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ASM International NV658.00 EUR-1.02Rating
ASML Holding NV829.50 EUR-2.18Rating
AXA SA31.94 EUR-0.56Rating
Basf SE44.10 EUR-2.51Rating
Capgemini SE194.40 EUR0.57Rating
Dassault Systemes SE34.46 EUR1.65Rating
Deutsche Telekom AG24.19 EUR-0.29Rating
EDP Renovaveis SA13.83 EUR0.66Rating
Glencore PLC441.95 GBX-1.98Rating
GSK PLC1,522.50 GBX-0.49Rating
Novartis AG Registered Shares94.20 CHF-0.94Rating
Novo Nordisk A/S Class B906.10 DKK2.15Rating
Rio Tinto PLC Registered Shares4,916.00 GBX-1.76Rating
RWE AG Class A32.79 EUR0.06Rating
Sanofi SA92.36 EUR0.22Rating
SAP SE181.50 EUR0.51Rating
Shell PLC2,793.50 GBX-1.45Rating
TotalEnergies SE62.73 EUR-1.21Rating
Volkswagen AG110.90 EUR-2.72Rating

About Author

Fernando Luque

Fernando Luque  is Senior Financial Editor at Morningstar Spain 

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