Record Stock Buybacks in Europe Make It Even Better Pick Than US

Investors looking for a fresh reason to buy European stocks, or to choose it over the US, can add record buybacks to their list.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Investors looking for a fresh reason to buy European stocks, or to choose it over the US, can add record buybacks to their list. Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Members of the Stoxx Europe 600 index have announced €85.7 billion ($101 billion) of share repurchases, the highest ever for the January-February period, according to a Barclays Plc tracker. Technology, financial and industrial firms have led the way so far and, with earnings-season curbs on executing buybacks lifting as companies wrap up results, the bumper returns for shareholders look set to become even larger. “We’re seeing a strong acceleration in corporate activity,” said Barclays strategist Emmanuel Makonga. “Executions are already running above average, and with March typically the seasonal peak, activity should rise further as blackout windows clear.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Investors are rewarding companies for the repurchase spree. A Barclays basket of buyback announcers has outperformed the broader Stoxx 600 in total returns by more than five percentage points in the past six months. They’ve also outpaced a benchmark of so-called dividend aristocrats with strong payout records. “This matters for markets: companies are now returning as a steady source of demand just as the post‑blackout phase historically coincides with better equity performance,” Makonga added. On top of that, around 76% of buyback plans authorized by shareholders have yet to be carried out, “leaving plenty of dry powder to support flows into the second quarter,” he said.The numbers have been eye-catching. Rolls-Royce Holdings Plc surprised investors by unveiling its largest-ever repurchase program of as much as £9 billion ($12.1 billion) through 2028, sending its shares soaring to an all-time high.

London Stock Exchange Group Plc rallied after saying it will buy back £3 billion by February next year. Banks have featured prominently, with Deutsche Bank AG, Societe Generale SA and Standard Chartered Plc pledging programs after a strong 2025 for shares in the sector.The flipside of all this is that investors had high expectations for shareholder returns heading into the earnings season and have shown their displeasure when let down. Shares in the world’s largest publicly listed hedge fund, Man Group Plc, fell despite it notching a fresh record in assets under management. Morgan Stanley analysts saw the lack of a buyback as disappointing. BP Plc sank after halting repurchases, an unusual step for Big Oil after heaps of cash were handed to investors in recent years thanks to elevated crude prices. TotalEnergies SE reduced its share buybacks to the lower end of a guided range.The strong start of the year marks a re-acceleration in stock repurchase programs after a slowdown in 2025. Banks, energy and technology accounted for nearly 50% of Stoxx 600 buybacks last year, according to a Bloomberg Intelligence tracker. At the same time, dividends have continued to grow, underpinning the region’s standing as the go-to market for income strategies and adding to its appeal as an alternative to the US.

The Stoxx Europe 600 has outperformed the S&P 500 by six percentage points since the start of the year, as investors diversify outside of American markets, spooked by heavy spending on artificial intelligence and lofty valuations. Meanwhile, European equities are enjoying the support of major fiscal stimulus and increased defense spending in the region, as well as lower interest rates than in the US. A lighter weighting in technology shares has also been a positive. Now, rising shareholder returns are providing an additional boost.By contrast, there are signs the pace of shareholder returns in the US is dropping. Projections from Bank of America Corp. strategists, extrapolated from corporate client buyback activity, show S&P 500 repurchases are slowing. BofA’s corporate client buybacks are down 65% year-on-year after peaking at the end of February last year at 0.42% of S&P 500 market cap, based on rolling 52-week flows. They’ve been declining ever since, and currently run at 0.23%.“Buybacks by corporate clients slowed, and as percent of market cap have been tracking below typical seasonal trends for the last five weeks,” BofA strategist Jill Carey Hall wrote in a note this week. Portfolio managers across the globe are increasingly keen that companies to return capital rather than spend it. BofA’s fund manager survey published earlier this month showed the proportion of investors saying companies should use their cash flow for shareholder’s returns has risen to 33%, the highest in more than a decade. Those who would like corporates to increase capex plunged to 20% from 34% a month earlier. —With assistance from Farah Elbahrawy.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.