European Economic Update – 15 September 2014

European equities drift lower; Scottish referendum dominates markets across the continent

European equities drifted back from recent peaks last week as the prospect of a fragmented United Kingdom drifted ever closer during the final week before the referendum on Scottish independence.

The key driver behind the decline in European indices has been the prospect of contagion, or spillover, from the referendum. With vocal separatist movements across Germany, France and Spain; investors are clearly concerned that a move for independence in the UK could set a precedent for similar events in Europe.

An additional concern among continental investors is that a divided United Kingdom would increase the chances of a British exit from the European Union.

Consequently, European equities have remained under pressure into the new week, while Spanish sovereign debt yields reached their highest level for 2014 in response to the growing sense of unease across markets.

While it is not possible to predict the outcome of the referendum or the exact consequences of a yes vote, it is possible to say that such an outcome would doubtless be followed by a prolonged period of uncertainty. This could see equity markets remain under pressure throughout the final stages of the year, denting the prospect of strong finish.

EU Indices (DAX, Black), (IBEX, Red), (CAC40, Blue)



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