European equities sell-off in Q3 wipes out gains

Businessman graph downThe European equity markets made a loss in September and the third quarter (Q3) extinguishing hopes that a promising start to the year would keep its momentum.

According to Tim Edwards, senior director of index investing strategy at S&P Dow Jones Indices, despite the European Central Bank’s (ECB) extraordinary monetary policy of quantitative easing sending regional equities off to their best start in decades, a sustained period of volatile sell-offs has wiped out most of the gains.

The S&P Europe 350 ended September with a 4.4% loss, making it down 9% for the quarter. The slowdown in China, falling commodity prices and uncertainty has lead to a bearish sentiment towards European equities, according to Edwards.

Specific companies have also not helped improve investors’ confidence in the region. Volkswagen recent emissions scandal, compounded by Glencore’s collapse has brought their peers down with them.

Every sector of the S&P 350 was down apart from the Dow Jones Brookfield Europe Infrastructure Index, which posted gains.

“With a refugee crisis dominating the political news and scandal reverberating around the manufacturing powerhouse of Germany, it is hard to find positive notes beyond the gains in our regional fixed income indices,” says Edwards.

One glimmer of hope comes from S&P Ireland BMI, which was only down 2.6% for Q3 and is still up by over a third year-to-date.

But with the Eurozone once again slipping into deflation, preliminary figures published by Eurostat indicate that inflation in the region is -0.1% for September, the pressure is on the ECB to extend its monetary easing packages further.

©2015 funds europe