European equities turned in a muted performance in the April-June quarter. Investor caution reigned on account of sovereign debt concerns relating mainly to Greece but also other nations such as Ireland, Spain, and Portugal.
In the three-month period, Britain's FTSE gained 0.6% on a total return basis (assuming reinvested dividends), while France's CAC was roughly flat. Germany's DAX, however, outperformed other key markets, rising 3.3%.
Several mixed cues tugged stocks in different directions with sovereign debt risks and the still lingering effects of the Japanese earthquake offsetting largely positive moves on Wall Street.
The German index, however, was helped by strength in heavyweights such as Adidas, BASF, MAN and Merck KGaA, which rose between 6% and 22%, offsetting weakness in banks, utilities, and technology firms.
Elsewhere, stocks traded in a small range for the most part in April and May, but in June concerns in Greece came to a head after the debt-straddled nation, which has already been banished from private markets, required emergency financial assistance to service its immediate obligations.
The European Union and the International Monetary Fund demanded Greece implement spending cuts if it is to get emergency funds--a move the Greek parliament finally voted in favour of, despite widespread domestic protests.
Financial stocks were hit badly as speculation over their exposure to the debt of several troubled European nations continued.
Barclays, Crédit Agricole, Royal Bank of Scotland, and Société Générale erased between 5% and 10%. Lloyds Banking Group plunged more than 15% during the quarter as weak earnings and a muted outlook weighed on investor sentiment.
After seeing a brisk rise at the start of the year, commodity prices came under pressure after data showed the U.S. economy could be slowing down, coupled with concerns of a slowdown in China as well.
Nazim Khan is an assistant site editor for Morningstar.com based in Mumbai, India.
This is an edited version. The article originated from Morningstar.com.
