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Europe’s ‘Granolas’ fuel record stock market surge

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Europe’s ‘Granolas’ fuel record stock market surge

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Eleven companies dubbed the “Granolas” propelled European stocks to a record high this week, with their outsized contribution echoing the better-known “Magnificent Seven” in the US.

The crunchy acronym was coined by Goldman Sachs for pharma companies GSK and Roche, Dutch chip company ASML, Switzerland’s Nestlé and Novartis, Danish drugmaker Novo Nordisk, France’s L’Oréal and LVMH, the UK’s AstraZeneca, German software company SAP and French healthcare firm Sanofi.

In the past 12 months the group has accounted for 50 per cent of gains on the Stoxx Europe 600 index, which hit a new high on Thursday, and for about half of all mergers over the past five years.

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The data suggests Europe is experiencing a similar phenomenon to the US, where fund managers are increasingly concerned about the narrowness of a rally led by tech companies such as Nvidia, which surged to a $2tn valuation on Friday.

“The big keep getting bigger,” said Peter Oppenheimer, Goldman’s chief global equity strategist and head of macro.

“This idea that you were getting significantly increased concentration in the US market has grabbed massive attention, but it’s also being reflected in other markets,” said Oppenheimer. He expected the Granolas to drive “nearly all” of the combined revenue growth of Stoxx 600 companies over the next few years.

The Granolas as a group have climbed 18 per cent over the past 12 months beating the Stoxx 600’s 7.5 per cent rise over the same period.

Over the past three years, the Granolas have performed in line with the US’s Magnificent Seven — a group of technology stocks comprising Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia — and with much lower volatility, though they have not kept pace over the past 12 months.

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The Granolas are more diverse than the exclusive tech focus of the Magnificent Seven. The top performer in the past 12 months is Novo Nordisk, which has been boosted by investor enthusiasm over its weight loss and diabetes drugs, and is up 69 per cent.

The Granolas’ share of the Stoxx Europe 600 index has climbed to 25 per cent, approaching the Magnificent Seven’s 28 per cent weighting in the S&P 500. However, the European grouping, which has a combined market capitalisation of about $3tn, is dwarfed by its US peers, which have a combined value of around $13tn.

The Granolas are cheaper than the Magnificent Seven on an earnings multiple, trading at 20 times next year’s forecast earnings, compared with the Magnificent Seven’s 30 times. Both sets of companies are widely seen as having strong balance sheets and healthy margins, and — despite European companies’ reputation for focusing on dividends — invest similar shares of cash flow into research and development and capital expenditure.

Some market participants believe there is too much focus on the performance of the biggest companies, pointing out that major indices have long tended towards top-heaviness and that smaller stocks often perform even better.

“People are fixated on the size of these companies,” said Vontobel portfolio manager David Souccar. “[If] a small-cap compounds by 50 per cent over five years . . . It won’t create as much value as a [Granolas] or Magnificent Seven stock in absolute terms, but my return is better,” he said.

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Line chart of Market cap as percentage of STOXX 600 showing The Granolas’ growing dominance of Europe's benchmark stock index

The US has become increasingly dominant among global equity markets since the financial crisis as near-zero interest rates lifted the valuations of tech groups with strong profit growth.

Over the same period, post-crisis regulation and a decline in oil prices from their 2008 peak knocked the banks and energy groups that form a large part of European bourses. “But now there are pockets of Europe that are doing very, very well,” said Oppenheimer.

Recent rises in interest rates have helped strengthen the position of the biggest companies to the detriment of cyclical and long-duration assets, according to analysts, as banks become more cautious about lending to smaller, supposedly riskier, borrowers.

Most analysts do not expect European and US markets to become less concentrated soon. They point to the rise of passive, index-tracking funds, which automatically pour money into the largest stocks.

Slowing economic growth could hurt smaller, lower-quality companies, although a so-called soft landing for the global economy may lead to a broadening out of the bull market.

“It’s very hard for me to see a trend reversal. The rise of passive investing is going to keep bloating [megacap stocks] up,” said Joachim Klement, head of strategy at broker Liberum. 

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But top-heavy indices could be vulnerable if the biggest companies start to disappoint investors’ high expectations, Klement added. When index heavyweights “screw up operationally, then things can turn sour quite rapidly”.

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Map: 5.1-Magnitude Earthquake Strikes off the Coast of California

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Map: 5.1-Magnitude Earthquake Strikes off the Coast of California

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Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

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A moderately strong, 5.1-magnitude earthquake struck in the North Pacific Ocean on Wednesday, according to the United States Geological Survey.

The temblor happened at 5:45 a.m. Pacific time about 40 miles west of Petrolia, Calif., data from the agency shows.

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As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

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Aftershocks detected

Subsequent quakes have been reported in the same area. Such temblors are typically aftershocks caused by minor adjustments along the portion of a fault that slipped at the time of the initial earthquake.

Quakes and aftershocks within 100 miles

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Aftershocks can occur days, weeks or even years after the first earthquake. These events can be of equal or larger magnitude to the initial earthquake, and they can continue to affect already damaged locations.

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When quakes and aftershocks occurred

 All times are Pacific time. The New York Times

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Sources: United States Geological Survey (epicenter, aftershocks, shake intensity); LandScan via Oak Ridge National Laboratory (population density) | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Wednesday, June 3 at 6:03 a.m. Pacific time. Aftershocks data is as of Wednesday, June 3 at 8:01 a.m. Pacific time.

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California’s primary for governor is undecided as candidates vie to be in the top two

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California’s primary for governor is undecided as candidates vie to be in the top two

Xavier Becerra, Democratic gubernatorial candidate for California, and Steve Hilton, Republican gubernatorial candidate for California, shake hands while arriving for a gubernatorial debate at KRON Studios in San Francisco in April.

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SAN FRANCISCO — The primary election for California governor is too close to call, with vote counting continuing Wednesday. Democrat Xavier Becerra and Republican business executive Steve Hilton lead the field with Democrat Tom Steyer in third place.

In California’s unusual primary system, all candidates, regardless of party, appear on a single ballot open to any registered voter. The top two candidates then move on to the general election, even if they’re from the same party. This year, voters had 60 names for governor to choose from.

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The winner will lead the country’s most populous state, where leaders often take on national political prominence. Incumbent Gov. Gavin Newsom is at his two-term limit and could be a Democratic contender for president.

Becerra, former Health and Human Services secretary under President Joe Biden, pitched himself to voters as an experienced political leader who isn’t afraid of President Trump, but his lead caps one of the most surprising and dramatic comebacks in recent state political history. As recently as April, polls were showing Becerra — also a former member of Congress and California attorney general — languishing in single digits in a crowded field.

In his remarks at his watch party in Los Angeles, Becerra noted his underdog status.

“Here in Hollywood’s hometown, we love a good underdog success story,” he said, drawing parallels between his campaign and his immigrant parents’ success story in California. “Guess what? The underdog stayed in the fight. Like my parents, I never gave up. Never stopped putting one foot in front of the other. Never stopped believing in the beacon-like goodness of California. And thankfully, neither did you.”

Hilton is a former Fox News commentator who also served as a political adviser to former British Prime Minister David Cameron. He was endorsed by President Trump in April, helping him to pull ahead of Riverside County Sheriff Chad Bianco, the other major Republican in the race. Hilton has campaigned on the idea that California needs change after 16 years under total Democratic control.

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The race is narrowing down after a tumultuous campaign

At his watch party in Huntington Beach, the British-born candidate — who became an American citizen five years ago — said it was the “honor of his lifetime” to receive over 1 million votes so far.

“Change is coming to California and it’s long overdue,” Hilton said. “We’re not there yet, but it’s looking good. It looks very much as if Californians really will have the chance to vote for change in November and take our state in a new direction.”

Democratic billionaire activist Steyer spent more than $213 million of his own money to boost his candidacy and push a progressive, populist message. While he was trailing Becerra and Hilton on Tuesday night, he said at his watch party in San Francisco that he remains confident he can close the gap in the days ahead.

“Together, we’ve scared the hell out of the corporate interests used to getting their way,” Steyer said. “It might take some time to figure out where this is going. We’re going to wait until every ballot is counted. We’re gonna give democracy a time to work. And we know we finished really strong.”

The early results are not certain to hold, in part because of unusual voting patterns in this primary election: Ballot-tracking data heading into Tuesday evening showed that Republicans were more likely to vote early by mail, while Democratic voters in this deep-blue state held onto their mail-in ballots or chose to vote in person. That’s the reverse of recent elections, which saw more Democrats voting by mail and Republicans tending to vote in person on Election Day.

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The uncertainty on election night capped a race that remained crowded and unsettled to the end. To some extent, the race was defined by who wasn’t running.

Some of the state’s most high-profile Democrats — former Vice President Kamala Harris, U.S. Sen. Alex Padilla and California Attorney General Rob Bonta — all passed on a potential bid to succeed Newsom.

The race was disrupted in April when then-U.S. Rep. Eric Swalwell’s campaign for governor imploded amid allegations of sexual assault and harassment. Swalwell resigned from Congress shortly after the accusations surfaced and has denied assault allegations.

Swalwell had been gaining in polls and racking up high-profile endorsements, and his exit seemed to primarily benefit Becerra, who had been stuck in single digits in many polls. Ultimately, it quieted fears among Democrats who worried that the messy Democratic field could result in Bianco and Hilton winning the top spots in the June primary.

Marisa Lagos covers California politics at KQED and co-hosts the Political Breakdown show and podcast.

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Supreme Court reinstates Republican-favored Alabama congressional districts

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Supreme Court reinstates Republican-favored Alabama congressional districts

The U.S. Supreme Court

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The Supreme Court on Tuesday cleared the way for Alabama to use a congressional district map favored by Republicans.

The court, in an unsigned order, overturned a three-judge district court panel that found that the map is “tainted by intentional race-based discrimination.” The court’s three liberals publicly dissented.

The ruling means that Alabama’s 2026 midterm elections will feature six Republican-leaning districts and one Democratic-leaning one, as opposed to a map with only five safe Republican seats. Democrat Shomari Figures, who represents Alabama’s Second District, will likely lose his seat as a result of the high court’s ruling.

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The story of Alabama’s congressional map is long and tortured. It began in 2021, when the state implemented a new map to account for population changes in the census. The map featured only one majority-black district out of seven, even though the state is more than one-quarter Black.

Voters immediately sued, claiming the map illegally diluted minority votes in violation of the Voting Rights Act and the Constitution. Lower court judges agreed, ruling that the state must draw a map with two districts where Black voters have a realistic chance of electing their candidate of choice. The Supreme Court more than once has ordered Alabama to draw a compliant map.

But the state has refused and instead continued to litigate the case. On Tuesday, that tactic paid off.

What changed? In April, the Supreme Court’s conservative supermajority all but gutted what remains of the Voting Rights Act, ruling that states cannot purposefully draw districts that are majority-minority.

Alabama then asked the high court to reinstate the state’s old map, under the theory that this new ruling meant that it was permissible to use a map with only one majority-Black district. In an unsigned, unexplained order in May, the high court essentially reversed its previous opinions, and allowed Alabama to use the old map for the upcoming midterm elections.

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This set off a flurry of activity in Alabama. By the time the Supreme Court issued its May order, absentee balloting had already begun, using the court-drawn map. So Republican Governor Kay Ivey cancelled elections and scheduled a special primary for August for the affected congressional races.

The case, however, was not over.

In its ruling, the Supreme Court had ordered a lower court panel to continue evaluating Alabama’s map in light of its recent Voting Rights Act decision. And just 15 days after that order, the panel, composed of three Republican judges—two of them Trump appointees—concluded unanimously that even under the Supreme Court’s new standards, the plan for a single black district was “intentionally discriminatory.”

So, once again, Alabama returned to the Supreme Court, arguing that the map was partisan, not racially discriminatory. In short, that the Republican legislature simply drew the map to elect more Republicans. And that under the Supreme Court’s new interpretation of the Voting Rights Act, the GOP map should be allowed to stand.

The court’s conservative agreed, writing that the lower court “did not heed the presumption of legislative good faith.”

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The court’s three liberals publicly dissented, castigating the conservative majority for failing to abide by its 2006 decision in the case of Purcell v. Gonzalez. That decision declared that courts should not change election rules too close to an election.

Justice Sonia Sotomayor, in her dissent, said the court “debases the democratic process” and “corrodes the rule of law by rewarding Alabama’s gamesmanship and outright defiance of court orders.”

Tuesday’s decision is the latest in a series of Supreme Court rulings that could well reshape the 2026 midterm elections, making it much harder for Democrats to prevail.

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