This has certainly been a year to forget for European equities but there are a number of reasons why investors might end up remembering 2018.
First up, the last time cash outperformed equities and bonds was in 1994, according to Bank of America Merrill Lynch. You need to go all the way back to 1969 for the last time cash returns were positive while equity, credit, and government bond returns were all negative. If that’s not sobering enough, consider that the slump in stocks from their January highs wiped out about $17 trillion of global market capitalisation, equivalent to the gross domestic product of the European Union.
“Economic momentum is deteriorating in the US and there is little evidence of a stabilisation, not to mention an improvement, in the rest of the world,” said Fabrizio Quirighetti, chief investment officer for Syz Asset Management. “Yes, valuations are cheaper than three or six months ago, but in a context of deteriorating macro backdrop, as we are now, they probably aren’t cheap enough to justify per se a sustained rebound.”
Once again, the Stoxx Europe 600 Index proved unable to sustain a break through the ceiling that has capped its gains since 2000 and the benchmark has now broken the long-term bull trend it started in 2009.
The optimism around European equities at the beginning of 2018 proved short lived as they succumbed to the shocks of trade wars and slowing global growth that battered global markets. The continent brought more misery upon itself as investors recoiled from the never-ending Brexit saga, budget turmoil in Italy, mayhem sparked by the Yellow Vest protests in France and renewed worries about Greek debt.
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Read more:
UK stock market: the battered losers and underwhelming winners of 2018
Investors must adjust their stance in 2019 as interest rates rise
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To make matters worse, European companies delivered lacklustre earnings and gains in corporate profits lagged behind their US counterparts, boosted by huge tax cuts from the Trump administration.
The Stoxx Europe 600 has closed out its worst year since the financial crisis, a decline that has depressed stock valuations to a six-year low. The index’s price-to-earnings ratio is back at 2013 levels, and dividend yields haven’t been this high since 2012. For months, analysts have been saying European stocks are cheap, few more so than the pummelled auto sector, where P/E ratios have dropped to 5.8, while bank stocks trade at just eight times estimated 2019 earnings.
That’s failed to entice investors, who have used just about any bounce in stock prices this year to sell. More money fled European stocks in 2018 than any other major region, with outflows in 40 out of the past 41 weeks. EPFR Global’s numbers show that European equity funds have lost about $73 billion of assets this year. The closest thing to a silver lining is that 2016 was even worse, when the exit totalled $100bn.
The broad sell-off has left every sector in the red, with banks and autos in a race for the bottom spot. Top-performing industries in the first half, such as basic resources, technology and retail, were later overwhelmed by trade tensions and faltering economies. High-flying oil stocks began to fall to Earth in October as crude prices tumbled. WTI crude slumped 40 per cent in 55 trading days and remains near $45 a barrel, compared with $76 less than three months ago.
Not only is this the worst year for European equity returns since the financial crisis, trading volume has also dwindled to the lowest since 2000. That long list of uncertainties from London to Rome and Paris to Athens has driven investors away.
The Euro Stoxx 50, home to the 50 biggest companies in the Eurozone by market value, entered a bear market on Thursday, joining Germany’s DAX and Italy’s FTSE MIB, which descended to the level earlier this year. After Friday’s bounce, the Stoxx Europe 600 benchmark is about 4.2 per cent from its own bear market.
PROFILE OF HALAN
Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
The bio:
Favourite holiday destination: I really enjoyed Sri Lanka and Vietnam but my dream destination is the Maldives.
Favourite food: My mum’s Chinese cooking.
Favourite film: Robocop, followed by The Terminator.
Hobbies: Off-roading, scuba diving, playing squash and going to the gym.
The Florida Project
Director: Sean Baker
Starring: Bria Vinaite, Brooklynn Prince, Willem Dafoe
Four stars
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
The specs
Engine: 3.8-litre twin-turbo V8
Power: 611bhp
Torque: 620Nm
Transmission: seven-speed automatic
Price: upon application
On sale: now
McLaren GT specs
Engine: 4-litre twin-turbo V8
Transmission: seven-speed
Power: 620bhp
Torque: 630Nm
Price: Dh875,000
On sale: now
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The Equaliser 2
Director Antoine Fuqua
Starring: Denzel Washington, Bill Pullman, Melissa Leo, Ashton Sanders
Three stars
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The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Brief scoreline
Switzerland 0
England 0
Result: England win 6-5 on penalties
Man of the Match: Trent Alexander-Arnold (England)
Rajasthan Royals 153-5 (17.5 ov)
Delhi Daredevils 60-4 (6 ov)
Rajasthan won by 10 runs (D/L method)
England Test squad
Ben Stokes (captain), Joe Root, James Anderson, Jonny Bairstow, Stuart Broad, Harry Brook, Zak Crawley, Ben Foakes, Jack Leach, Alex Lees, Craig Overton, Ollie Pope, Matthew Potts
Warlight,
Michael Ondaatje, Knopf
The specs
BMW M8 Competition Coupe
Engine 4.4-litre twin-turbo V8
Power 625hp at 6,000rpm
Torque 750Nm from 1,800-5,800rpm
Gearbox Eight-speed paddleshift auto
Acceleration 0-100kph in 3.2 sec
Top speed 305kph
Fuel economy, combined 10.6L / 100km
Price from Dh700,000 (estimate)
On sale Jan/Feb 2020
The low down
Producers: Uniglobe Entertainment & Vision Films
Director: Namrata Singh Gujral
Cast: Rajkummar Rao, Nargis Fakhri, Bo Derek, Candy Clark
Rating: 2/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
MATCH INFO
Manchester City 1 (Gundogan 56')
Shakhtar Donetsk 1 (Solomon 69')
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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How to join and use Abu Dhabi’s public libraries
• There are six libraries in Abu Dhabi emirate run by the Department of Culture and Tourism, including one in Al Ain and Al Dhafra.
• Libraries are free to visit and visitors can consult books, use online resources and study there. Most are open from 8am to 8pm on weekdays, closed on Fridays and have variable hours on Saturdays, except for Qasr Al Watan which is open from 10am to 8pm every day.
• In order to borrow books, visitors must join the service by providing a passport photograph, Emirates ID and a refundable deposit of Dh400. Members can borrow five books for three weeks, all of which are renewable up to two times online.
• If users do not wish to pay the fee, they can still use the library’s electronic resources for free by simply registering on the website. Once registered, a username and password is provided, allowing remote access.
• For more information visit the library network's website.
