The skew toward tech giants in the U.S. stock market is well known. Less appreciated is that Europe’s markets are now dominated by drugmakers.
Health care accounts for a quarter of the Stoxx Europe 50 index—almost as much as the almost 28% represented by information technology in the S&P 500. Five of Europe’s top 10 companies by market value are now drug producers: Novartis , Roche, AstraZeneca , Sanofi and Denmark’s Novo Nordisk . This trend isn’t new, but it has been turbocharged by this year’s pandemic-driven downturn, which has highlighted the social relevance of the drug industry as well as its typically recession-proof profit profile. A vaccine AstraZeneca has licensed from the University of Oxford is a front-runner in the battle against Covid-19.
The rise of health care is one result to emerge from an analysis of Europe’s largest companies and how they have shifted over the past decade and a half. Another is the dominance of Switzerland. Since 2018, the continent’s top three firms have all been from the famously stable Alpine nation: Nestlé , Roche and Novartis. Back in 2004, when FactSet records for the Stoxx Europe 50 index began, the top three were all British: BP , HSBC and Vodafone .
The U.K. market has a bias toward banking and oil and gas, industries that ruled the business world 15 years ago but are now so deeply out of favor that they don’t even feature in the top 10. Apple ’s market value overtook that of the entire FTSE 100 earlier this month.
Europe’s markets have also been marked by the meteoric rise of the technology sector, albeit in a modest way. The five most highly valued companies in the Stoxx Europe 50 now include SAP, the German business-software giant, and ASML, a Dutch company that specializes in equipment to make microchips. Both are leaders in their respective niches, but cannot match the breadth and depth of consumer-facing U.S. giants like Alphabet and Amazon . Meanwhile, network providers such as Vodafone and Telefónica , which led Europe’s stock markets in the tech frenzy of the late 1990s, continue to hemorrhage value in the current one.