Weakness in European consumer stocks' excessive - UBS
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WEAKNESS IN EUROPEAN CONSUMER STOCKS EXCESSIVE - UBS
The underperformance in European consumer stocks is "excessive" according to UBS equity strategists, who flag profitable opportunities in the space as rate cuts materialise and spending improves.
Consumer stocks span autos, retailers, clothing and electrical products, hotels and airlines among others.
According to LSEG Workspace, autos .SXAP are off 15% in the last three months, while travel and leisure stocks .SXTP are down 10%, underperforming the 3.5% drop in the broader STOXX 600 .STOXX.
"Since the middle of 2023, consumer stocks have underperformed the SXXP by around 30% and are now trading near their lowest relative levels in the last five years," write the UBS team.
So what's behind the weakness - which is stark given rising real wages and confidence, high excess savings and falling yields?
UBS highlights weakness in pricing power for airlines and high price sensitivity in lower-end retail. Nevertheless, they see fairly broad resilience and top-line growth for higher-end consumer goods and services companies.
Among the stocks they highlight with the highest total expected returns are automaker manufacturing company Stellantis STLAM.MI, Germany's Delivery Hero DHER.DE and Easyjet EZJ.L.
They say stocks to continue to avoid may include home improvement retailer Kingfisher KGF.L, French payment tech firm Worldline WLN.PA and German automaker Volkswagen VOWG_p.DE.
(Lucy Raitano)
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