The Week In Hindsight, 23 May 2014

European equity markets rose this week as investors increased bets that the opening of June will see the ECB take action against stagnant growth. This was as another week brought with it another round of less than impressive economic data from the continent, most notably Germany.

The week’s numbers saw businesses in Europe’s largest economy revise down their assessment of economic conditions while the forward looking Manufacturing PMI showed the industrial outlook worsening over the months ahead. French manufacturing and services data also under performed against expectations while Italian posted a contraction for the month of April.

Parts of the European periphery received a show of support from the financial world during the week as both Greece and Spain received upgrades to their credit ratings. Fitch upgraded Greece by one notch, while Standard and Poor’s upgraded Spain by a notch also.

All in all, our outlook for European policy as well as European markets remains in place and unchanged. This is that, in line with the general consensus, we expect further stimulus in the form of a rate cut to be forthcoming at the up and coming ECB meeting in two weeks time. For further information relating to this, please see our previous posts under the heading Europe.

EU Indices (Dax, black)