European Stocks Decline, Dragged Lower by Selloff in Defensives

European shares closed lower after fluctuating between gains and losses, as investors rotated out of defensive and growth sectors.

The Stoxx 600 Europe Index lost 0.4% at the close, after earlier rising as much as 0.5%. Energy firms, banks, and insurers were up 0.6% or more, while chemical and health-care shares were among the worst performers.

Europe’s equity benchmark is still up more than 4% this month, poised for its best February since 2015. Economically sensitive and cheap stocks are gaining traction, helped by rising bond yields and reflation bets, while pandemic winners have come under pressure. Some strategists see the outperformance of value shares over growth peers, triggered by the breakthroughs in inoculations and U.S. election in November, becoming a trend throughout this year.

European Stocks Decline, Dragged Lower by Selloff in Defensives

“So far this year, we have witnessed a tug of war in market leadership between growth and cyclical exposures,” said Edward Park, chief investment officer at Brooks Macdonald Asset Management. “Since the start of 2021 we have seen cyclical equities in vogue, out of fashion then back in vogue again. The fate of cyclical equities is inexorably linked to the vaccine rollout.”

Earnings also drove share moves on Thursday, with Anglo American Plc up 3.9% and Tenaris SA surging 14% after reporting results that beat expectations. Beer giant Anheuser-Busch InBev NV dropped 6.2% as it missed quarterly profit estimates.

Elsewhere, Nokia Oyj jumped 4.6% amid fresh interest in a Reddit trader forum. DS Smith Plc rallied as packaging and paper rival Mondi Plc was said to explore a takeover.

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