European stock markets are currently 5% cheaper than their US counterparts. Denmark is the cheapest European market, while Spain is the most expensive. The financial sector is overvalued, while the consumer defensive sector is undervalued. Since April, stock markets have shown positive performance despite US trade policy uncertainty. The Morningstar Global Markets Index rose by 23.9% in euros, US Market Index by 23.1%, and Europe Index by 21.1%.

The US market is slightly overvalued with a price/fair value ratio of 1.03, while the European market is undervalued at 0.95. The gap between value and growth stocks has narrowed, with both trading at similar ratios. Large European companies are valued at 0.95, while small companies are at 0.93. European countries show varying valuations, with Denmark undervalued by 20% and Spain overvalued by 8%.

The financial sector in Europe is overvalued at 1.06, with Spain’s Banco Santander trading at a premium of 22% and Italy’s Unicredit at 13%. The real estate sector is the cheapest, while consumer defensive sector is undervalued at 0.88. Nestlé and Unilever are trading at discounts of 18% and 11% respectively. All stocks under Morningstar coverage have fair value estimates to determine undervaluation or overvaluation.

Read more at Morningstar: Is Now a Good Time to Buy European Stocks?