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European Equities No Match for Strengthening U.S.

NEW YORK ( TheStreet) -- European stocks continue to lag U.S. stocks as the economies' paths diverge.

The Standard & Poor's 500 Index and German DAX stock index continue to move in opposite directions as the U.S. economy improves at a faster pace than before, and euro area fundamentals deteriorate.

>>Read More:10 Stocks Carl Icahn Loves in 2014

The S&P 500 is tracked by the SPDR S&P 500 (SPY) , an exchange-traded fund, and the DAX is tracked by iShares MSCI Germany Index (EWG) .

reading for the Purchasing Managers' Index in the euro area, which was released on Monday, fell to 50.7 from 51.8 for July. The figure came in below a preliminary reading of 50.8, according to London-based Markit.

The index for Germany, the region's largest economy, was 51.4, compared with an  estimate of 52.4, while Italy's index was 49.8, compared with estimates of 51.9.

The decline in European factory activity was largely the result of fighting in Ukraine and uncertainty over sanctions in Russia.

In contrast, Markit said its final U.S. manufacturing PMI rose to 57.9 in August from 55.8 in July, marking its highest level since April 2010.

The chart below shows that in 2014, euro-area manufacturing activity has trended downward, while U.S. manufacturing activity has risen to record levels.

Chart provided by Trading Economics


European inflation figures released on Friday provided further testament to weakness in the region.

Consumer prices rose by just an 0.3% annual rate in August, according to official figures released by Eurostat, meeting expectations but marking a five-year low. That was down from 0.4% in July, and is significantly below the central bank's target of 2% growth.

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