The Week In Hindsight, 07 February 2014
European stocks advanced during the closing stages of the week despite mixed messages in economic data across the continent and uncertainty over the future of Mario Draghi’s OMT (outright monetary transactions) program in the German Constitutional Court.
The brief taint to what was a positive close to the week came as German lawmakers voted to defer responsibility for a decision over the legality of an ECB bond purchase program by referring the issue to Europe’s highest court, the Court of Justice of the European Union. This was after Italian and Spanish data signalled a brief splutter in the continental recovery.
Spanish unemployment was shown to have risen during January while continent wide retail sales dropped and German industrial activity slowed. Although sentiment surrounding European stocks remains broadly positive, the continent does have an above average exposure to any slowdown in emerging markets. This is due to the significant level of mutual trade that takes place between Europe and the likes of China. Should the emerging market outlook continue to deteriorate then it is possible that the recovery in Europe could falter.
Germany’s Dax (black), France’s CAC 40 (blue) and Spain’s IBEX 35 (red)