Subscribe to Business UpdatesEuro Stocks Surpass U.S. Markets
April 03, 2007 02:12 PM
by
findingDulcinea Staff
A new report shows U.S. capital markets lagging behind their transatlantic counterparts, as the euro booms and the dollar declines. But how accurate is this data?
30 Second Summary
America’s hold on world finance appears to be weakening, according to business news source Thomson Financial.
European capitalization––the total value of all outstanding European shares––rose to $15,720 billion (€11,819 billion) at the end of last week. That figure surpasses the $15,640 billion value of U.S. stock markets.
Since 2003, European shares have risen 160% in value; compared to a 70.5% rise for their U.S. equivalents. The euro increased 26% against the dollar over that period. At time of writing, one euro is worth $1.33629.
However, the Thomson Financial figures, reported in the Financial Times, differ from other financial indices in two regards. First, the report defines Europe as encompassing “emerging Europe,” which includes Russia, with its enormous energy reserves.
Secondly, the new data doesn’t account for lesser value government sell-offs, as do the FTSE and MSCI, the favored indices of U.S. fund managers.
European capitalization––the total value of all outstanding European shares––rose to $15,720 billion (€11,819 billion) at the end of last week. That figure surpasses the $15,640 billion value of U.S. stock markets.
Since 2003, European shares have risen 160% in value; compared to a 70.5% rise for their U.S. equivalents. The euro increased 26% against the dollar over that period. At time of writing, one euro is worth $1.33629.
However, the Thomson Financial figures, reported in the Financial Times, differ from other financial indices in two regards. First, the report defines Europe as encompassing “emerging Europe,” which includes Russia, with its enormous energy reserves.
Secondly, the new data doesn’t account for lesser value government sell-offs, as do the FTSE and MSCI, the favored indices of U.S. fund managers.
Headline
According to stock market historian Mike Staunton of the London Business School, the last time Europe bested the United States in stock performance was before the First World War.
Source: The Financial Times
Few “economists, market analysts, or even geographers” share the definition of Europe used by Citigroup and Thomson Financial, who produced the new figures. The Thomson definition covers all of “emerging Europe,” including Russia and Turkey.
Source: The Financial Times
Background
A review of equity capital markets for the first quarter 2007 shows the London Stock Exchange leading with 20.4% of the Initial Public Offering (IPO) market. Wall Street and the Nasdaq accounted for 8.3% and 14.3% respectively.
Source: Thomson Financial
European growth forecasts ended 2006 higher than at the start of the year for the first time since 2000. January expectations that the gap between the U.S. and European economy would narrow further seem to have been realized.
Source: The Economist
History
By April 2006, analysts opined that the Euro would retain its strength against the dollar over the long term. At that point the euro was worth about $1.23.
Source: Dow Jones
The dollar fell to a 20-month low against the euro in November last year, with one euro buying $1.3128. The euro gained strength thanks to the narrowing gap between U.S. and European interest rates and confident reports on the future of European business.
Source: Fox News
Russia has powered the rise of “European” stocks, and 2006 was its eighth consecutive year of growth, which averaged 6.7% per annum over that period.
Source: The CIA Worldbook
Reference Material
The dollar has been unusually low since 2004, when market analysts made predictions of a further weakening in U.S. currency, according to CNN. A weak dollar is bad for imports and U.S. citizens who want to travel; but it boosts exports, which is important when the trade deficit is high, as at present.
Source: CNN
Related Links
The world’s stock exchanges are moving towards closer consolidation. In February 2007, the London Stock Exchange (LSE) rejected a takeover bid from Nasdaq, which already owns 29% of LSE stocks.
Source: The BBC
Late February 2003, the 9.2% percent drop in China’s share index, the CSI 300, appeared to precipitate a global dip in stock markets the world over. Bloomberg news writer Michael Sesit argues that the link between Chinese and world markets is more psychological than economic.
Source: Bloomberg News
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