European consumer-discretionary companies such as Marks & Spencer Group Plc are outperforming consumer-staple businesses including Nestle (NESN) SA, indicating investors’ forecasts for the region’s economy were too pessimistic.
Investors have pushed shares of the discretionary group higher in recent weeks as concerns about another prolonged recession have moderated, according to Robert Griffiths, a London-based pan-European equity strategist at Royal Bank of Scotland Group Plc. These stocks historically are “early movers” -- meaning they start to outperform as shareholders improve their economic assessments, he said.
“When investors spot signs of stabilization, this is an area of the market that’s early to rally,” Griffiths said, adding that these shares are benefiting from company sales reports and surveys that are beating forecasts.
The Bloomberg European Consumer Cyclical Index (BECNCY), comprised of retailers and automakers, outperformed the Bloomberg European Consumer Non-Cyclical Index (BECCYC) by 35 percent from Feb. 24, 2010, until July 5, 2011. It then underperformed by 24 percent through Dec. 19, 2011. Since mid-December, the index of discretionary companies has risen 11 percent, while the consumer-staple index -- which includes Nestle, the world’s biggest food company, and pharmaceutical maker GlaxoSmithKline Plc (GSK) -- has increased 3 percent.
