Investors looking for a haven in European stocks may have been startled to see the markets there dip even more sharply recently than those in the United States.
After drops of more than 1% on Monday in markets throughout Europe--even worse in Germany and France--the major European stock indexes are down slightly more from their mid-July peaks than are the Standard & Poor's 500-stock index and the Dow Jones industrial average.
But several international securities experts said Monday that the bull market in continental Europe--Britain is considered an exception--still seems a good bet to outlast its American cousin.
"We think this is more of a correction than a trend-setting event," said Andrew Kim, co-manager of Sit International Growth Fund, referring to Europe's recent slump.
Kim and other international portfolio managers said Europe is earlier along in its economic cycle and corporate profits there are still growing, while on this side of the Atlantic they are tailing off.
Despite the recent declines in stock indexes, Europe remains the place to be in equities so far this year. The two biggest continental exchanges, Germany's DAX and France's CAC, are up 29% and 31% year-to-date, respectively, compared with 11.6% for the S&P 500 and 8.4% for the Dow.
Stock markets throughout continental Europe have posted 20%-plus gains year-to-date almost across the board.
The most conspicuous European laggard is the British FTSE-100 index, up 8.8%.
Kim noted that Britain is well into a manufacturing slowdown and is struggling with rising interest rates, so he draws a sharp distinction between it and its continental neighbors.
European share valuations, while high by historical standards, are 5% to 10% cheaper on average than U.S. ones, says David Mannheim, a foreign-funds expert at MFS in Boston.
Other positive factors--relative to the United States--are that European firms are generally less exposed to Asia than their American counterparts and that the corporate restructuring movement is at an earlier stage in Europe, with more benefits still to come.
Another unusual plus for Europe: political stability. Kim noted that with President Clinton's legal problems worrying investors and with political turmoil in Asia a fallout from the financial crises there, the faintly boring political atmosphere in Europe is welcome.
One caveat: After four years of 20% annual returns, stock market investors in Europe have become just as demanding as those in the United States. Companies that release disappointing earnings projections can expect to be punished just as severely in Frankfurt as on Wall Street.
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Recent declines in 10 key European stock markets and their year-to-date gains, both measured in native currencies:
Market (index) Decline from peak YTD gain Sweden (OMX) --12.9% +20.4% Portugal (General) --12.5 +44.0 Germany (DAX) --11.9 +28.9 Netherlands (AEX) --11.8 +27.8 Italy (MIB-30) --10.7 +40.2 France (CAC) --10.6 +31.4 Britain (FTSE-100) --9.6 +8.8 Switzerland (MI) --9.0 +23.2 Spain (IBEX) --8.9 +38.4 Greece (ASE) --4.7 +82.1 U.S. (S&P 500) --8.7 +11.6