Europe’s stocks disappoint again despite stimulus

After pumping more money into Europe’s equities than any time in history, last year’s buyers are being burned with some of the world’s worst returns.

Global fund managers are bailing at the fastest clip ever, even though the Euro Stoxx 50 Index yields 3.7 percentage points more than bonds in dividends and companies from BNP Paribas to Siemens are about 25% cheaper than the S&P 500.

Let down by the lure of monetary stimulus, a weak currency and low oil prices, the UK vote to leave the EU was the last straw for eurozone bulls who have lived through multiple corrections since 2012 and political crises from Greece to Ukraine.

Stock forecasters just turned the most bearish on the region since October amid pessimism about economic and earnings growth.

“All the elements were in place for Europe to shine, but the returns failed to materialise,” said Caroline Simmons, the London-based deputy head of UK investment at UBS Wealth Management. She recommends US stocks relative to eurozone equities.

European stocks drew $123bn (€112bn) from investors worldwide in 2015 only to see more than half of it taken back since January, according to Bank of America.

The outflows have been particularly severe in the four weeks since Britain quit the EU, with investors yanking $21.7bn. Even ECB president Mario Draghi’s pledges that policy makers won’t hesitate to add fresh stimulus are doing little to reassure investors.

The Euro Stoxx 50 had dropped 8.4% by last week, dragged down by monthly declines that topped 6% in January and June.

Losses exceed 20% in Italy and 9% in Portugal, Spain and Ireland. By contrast, the S&P 500 is up 6.4% in 2016, while the MSCI Asia Pacific Index has gained 1.6%.

Analysts say profits will fall 2.5% in 2016 and strategists expect the Euro Stoxx 50 will have its worst year since the height of the sovereign-debt crisis in 2011, losing 9.2%.

“Growth never kicked off, and now there’s a fear that it will begin to roll over,” said Kevin Lilley, a manager of eurozone at Old Mutual Global Investors in London.