Cyclical & Defensive Growth Surge in Europe

Ditching Consumer Discretionary and Pricey Growth for Resilient Gains

R-90 — Europe Watchlist — Investment Research Perspective, August 26, 2025

European equities exhibited significant divergence for the week ending Tuesday, August 26, 2025, with robust performance in semiconductors, defense, and select financials offset by sharp declines in luxury goods, chemicals, and underperformers in the health sector. Israeli chip equipment maker Camtek (CAMT.TA) and British defense contractor Elbit Systems (ESLT.TA) were clear standouts, both achieving perfect Total scores of 200, reflecting exceptional institutional confidence driven by geopolitical tailwinds and strong order books. The semiconductor theme extended to Tower Semiconductor (TSEM.TA), which surged 12.60% for the week. In contrast, the luxury sector faced relentless selling pressure. Adidas (ADSGN), Beiersdorf (BEIG), and Straumann Holding (STMN.S) all recorded maximum negative Total scores of -200, indicating severe fundamental concerns over slowing demand in key Asian markets. Swiss and German chemical giants Sika (SIKA.S) and Givaudan (GIVN.S) also faced bearish sentiment, scoring -200 and -157 respectively, on worries about input cost inflation squeezing margins. The financial sector presented a mixed picture: Barclays (BARC.L) and UBS (UBSG.S) scored strongly at 192 and 200, signaling confidence in restructuring stories, while Deutsche Boerse (DB1Gn) and Allianz (ALVG) scored negatively, reflecting concerns over capital market volatility and insurance liabilities. The overall picture is of a market aggressively rotating into cyclical and defensive growth while fleeing consumer discretionary and expensive growth names, particularly those with Asian exposure.

References — Reuters: "European Semiconductors, Defense Stocks Rally on Geopolitical Tensions"; "Luxury Goods Sector Crushed by Slowdown in Asian Demand"; "Barclays, UBS Lead Financials Higher on Restructuring Optimism".