Gavekal Capital: European Banks Are Backsliding

Thursday, June 26, 2014

European Banks Are Backsliding

Over the last week, European banks have been the worst performing industry group in the MSCI World index.  As a group, they are down 4.57%, on average, and have underperformed the MSCI World index by 5%.  While banks in North America and Asia are not market leaders, they have not experienced the hit that their European peers have in the last week.  Since bank relative performance is often an input in models of financial conditions, this would suggest a slight tightening in financial conditions in Europe recently.

MSCI Europe Industry Groups Performance (%)
image

MSCI North America Industry Group Performance (%)
image

MSCI Asia Industry Group Performance (%)
image

Only 3% of the banks in Europe experienced positive performance over the last week.

MSCI Europe Industry Groups - Percent Positive Performance
image

Banks in have Europe have been some of the structurally weakest stocks recently.  In the table below, we show the percent of companies in each industry group, in Europe, above 5 and 20 day moving averages.

MSCI Europe Industry Groups - Percent Above Moving Average
image

The move has been broad as only 9% of the European banks have outperformed the MSCI World index over the last 20 days.

MSCI Europe Industry Groups - Percent Outperforming MSCI World Index
image