European stock market rally looks very different to US

Global indices have enjoyed a decent rebound in the first quarter of 2023. How big a part have big tech stocks played in that rebound? As already mentioned, the US rally has been a narrow affair. Three mega-cap tech stocks – Apple, Microsoft, and Google parent Alphabet – accounted for almost all of the S&P 500′s gains in the first quarter, said DataTrek Research.

The picture gets even more lopsided if you add in a fourth, chip giant Nvidia, which is up 85 per cent this year. Were it not for these four stocks, the S&P 500 would actually have slipped in the first quarter. The same phenomenon is evident in emerging markets, with just two tech stocks – Taiwan Semi and Tencent – accounting for all of the gains in the MSCI Emerging Markets this year. However, things look different in Japan, where tech stocks have played a much smaller role. This is even more true of Europe, where the two biggest tech stocks – Dutch semiconductor company ASML and German software firm SAP – account for just 12 per cent of the year-to-date gains in the MSCI Europe index.

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Europe and Japan have outperformed the US thus far in 2023. This outperformance looks especially “impressive” given the fact the two regions have not relied on tech stocks, says DataTrek. A broad advance is a healthy advance, “and suggests these rallies are sustainable” into the second quarter.