EU Economic Update – 29 March 2015

Greece remains a threat, albeit a diminished one, while other European horizons continue to brighten

Despite all of the media headlines projecting either doom and gloom, or outright Armageddon, the euro area as a whole has shown some signs of improvement of late.

Germany, Spain & pockets of the Nordics appear to be particular bright spots, while some projections for French economic growth have also been revised higher during recent weeks.

The Spanish recovery continues to gather pace, with the nation now widely expected to be the fastest growing euro area nation this year. This is while German retail sales and industrial production have also been particularly strong over recent weeks.

In Sweden the economy has also outperformed during recent quarters, with Q4 GDP coming in a considerable distance above expectations at 2.7%, VS projections for growth of 1.6%.

Looking ahead we expect that both European economies and European equity markets should continue to benefit from the ECB’s funny money scheme (QE), which will see the bank buying sovereign bonds en masse.

This is as the upshot of the ECB QE program will be for it to depress yields available in fixed income and push more investors out into riskier asset classes such as corporate credit, emerging market sovereigns and of course, euro denominated equities.

On the subject of risk, Greece remains a liability, albeit a diminished one. We say a diminished liability as the alternative to accepting the demands of the euro-group is less attractive than the “more reasonable” program of reforms which is now on the table.

Therefore, while it is likely that there will be many more sensationalist headlines before the issues surrounding the nation are eventually resolved, we still feel that a peaceful resolution is the most likely outcome here.

German, French and Spanish Indices




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