European Stocks Are Crushing It

The Eurozone is leaving the recession, and European stocks have gotten the message.

The above chart comes courtesy of Mike O'Rourke of JonesTrading.

It shows how in recent weeks, European stocks are clobbering their US counterparts.

O'Rourke writes:

There are a couple of interesting trends in equity markets worth highlighting. The S&P 500 is flat over the past 3 months, meanwhile the Nikkei is down 10%. More noteworthy is the rotation over the past month. The S&P 500 is down 2.14% while the Euro Stoxx 50 is up 5%. There are two key factors we believe are responsible for the market’s new found affinity for European equities. First, there is the recent modest uptick in European economic data to less-recessionary levels. The second and more important aspect is that Chairman Bernanke’s lame duck status and uncertainty about the composition of the FOMC next year means investors now view ECB President Mario Draghi as the Central Bank leader who has the dual traits of easy policy and stability. We know Japan has easy policy, but the way their markets and currency have moved stability remains questionable. We believe that the (very) gradually improving economy, in combination with stable and easy Central Bank policy, has prompted investors to dip their toe into European equities in hopes that the goldilocks environment of the past two years here in the US is replicated.

Meanwhile, later this week we get Flash PMI data for Europe, giving us another look at the comeback in the Eurozone.