European Stocks Decline After S&P 500 Touches Record High

(Bloomberg) -- European stocks dropped as investors took profit on risk assets after the U.S. benchmark surged to a record intraday high, fueling concerns the rally may have gone too far.

The Stoxx Europe 600 Index retreated 0.6%, led by cyclical sectors including energy and banks. Jeweler Pandora A/S slumped the most among companies after saying organic sales may contract as much as 20% this year as the virus suppresses demand in some of its key markets.

European stocks have traded in a range since reaching a four-month high in July, with recovering macroeconomic data and better-than-expected corporate earnings offset by worries about rising coronavirus cases, a U.S. stimulus impasse and U.S.-China tensions. The Stoxx 600 last week briefly climbed above its 200-day moving average, but failed to overcome the technical resistance level decisively.

The S&P 500 today touched an intraday record high. The benchmark is poised for its quickest rebound on record amid Federal Reserve stimulus and gains for technology companies. The speed of the recovery rally is making fund managers wonder whether it’s time to take profit or whether they can reap more returns.

Euro-area stocks may benefit from investor skepticism toward U.S. stocks. An August survey by Bank of America Corp. showed that the euro-area is now the most popular equity region among fund managers, with their allocation increasing 17 percentage points to a 33% overweight, the highest since May 2018. In contrast, the exposure to U.S. stocks declined 5 percentage points to net 16% overweight.

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