Defense, Novo and Nestle: 2024 Highs and Lows in European Stocks

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(Bloomberg) — A surge in defense stocks, gains fueled by trades in banks and a rally in Siemens Energy AG shares were among the highlights for European stocks in 2024, a year that once again saw the region struggle to keep up with the United States. .

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Many of Europe’s biggest names were stuck in recession, including LVMH Moet Hennessy Louis Vuitton SA and food maker Nestle SA, whose shares are set to post their biggest annual decline on record. Like LVMH, automakers like Stellantis NV have been hit by China concerns, while the hype around obesity drugs is starting to fade, as evidenced by Novo Nordisk A/S conceding gains of more than 40% in the first half of the year.

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“European stocks are pricing in a lot of bad news,” said Aliki Roviak, sustainable portfolio manager at Rubico. “We see, under our base scenario, that some valuation potential will open up in 2025.”

Here’s a look at some of 2024’s biggest winners and losers:

Siemens Energy Stars

Siemens Energy AG’s 317% increase overshadowed all other members of the Stoxx Europe 600 index, and its gains even surpassed Nvidia Corp in dollar terms. The German renewable energy giant has seen growth in its grid technologies division offset weakness in its wind turbine business, leaving rivals Iberdrola SA and Enel SpA in the dust, from a stock market perspective.

Luxury laggards

It’s been a tough year for luxury stocks. The market value of LVMH – which not long ago was Europe’s largest company – has fallen by about 50 billion euros ($52 billion) as concerns grow about falling Chinese demand.

Gucci owner Kering SA hit its lowest level since 2017 as its sales forecasts disappointed investors once again. “Work to support the brand’s return remains ongoing, with little evidence so far of an imminent positive trend,” Chiara Battistini, an analyst at JPMorgan Chase & Co., said in a note.

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Defense support

Conflicts in Ukraine and the Middle East have supported defense stocks, while Donald Trump’s US election victory signaled potential pressure on NATO member states to increase their spending. Shares of Norway’s Kongsberg Gruppen ASA are up about 178% this year, while Germany’s Rheinmetall AG also saw triple-digit gains.

However, BAE Systems pared its rally in the final two months of the year, as Bank of America Corp analysts downgraded the British defense equipment manufacturer due to the risk of potential cuts in US government spending overseen by Elon Musk.

Enhance banking

The banking sector was the best-performing sector in Europe this year, with the Stoxx sub-index up 25%, supported by higher interest rates feeding into shareholder returns. Banca Monte dei Paschi di Siena SpA led the rise, more than doubling as the Italian lender resumed paying dividends after 13 years, and as local rival Banco BPM SpA took a stake as part of a government privatization.

The deals also provided fuel for gains. UniCredit SpA has begun pursuing Commerzbank AG, while Banco Bilbao Vizcaya Argentaria SA has made a hostile takeover bid for smaller Spanish rival Banco Sabadell SA.

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“Everything that could go right has gone right for the banks,” said Maria Veitman, head of equity strategy at State Street Global Markets.

Stellantis leads to auto losses

The auto sector has been hurt by the growing power of Chinese competitors such as BYD Ltd., while US President-elect Trump promoted his tariff-focused economic plan after the election, exacerbating the sector’s problems. The Stoxx Auto Index is down 12% year to date versus the broader index’s gain of 5.9%.

Stellantis NV was the sector’s biggest loser, falling 40% amid falling US sales and the departures of both CEO Carlos Tavares and CFO Natalie Knight within a few months.

Novo bubble fears

Novo Nordisk A/S faced some volatility at the end of the year, as data from its experimental obesity drug was disappointing. CagriSema patients lost an average of 20.4% of their body weight over 68 weeks in one study, less than the 25% the company had expected. The stock hit a record 29% within the first hour of the news, and has since partially recovered.

“Novo’s obesity bubble has well and truly burst,” Naresh Chauhan, an analyst at Intron Health, said in a note to clients. Shares are now down 8.9% year to date.

Hot UCB potential

Weight-loss drugs weren’t the only drugs that caught investors’ attention. Shares of Belgian biotech company UCB SA have more than doubled in 2024, largely reflecting optimism around the huge potential of skin disease treatment Bimzelx.

The rally also fueled gains in Financiere de Tubize SA, a listed investment vehicle for the family of Emanuel Janssen, who founded UCB as a Belgian chemicals producer almost 100 years ago.

-With assistance from Jonas Ekblom, Lisa Pham, Kate Rees, and Bree Bradham.

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