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Three catalysts for European equities

In recent weeks the bear case for European equities has become more pronounced on the back of weaker-than-expected GDP data and deflation concerns. This softening in economic momentum has led some investors to question whether the ECB is behind the curve and indeed whether it has the requisite firepower in its armoury. We believe that these concerns have been overplayed by the market: European leading economic indicators are still largely stable and positive, whilst we also believe that there are a number of imminent catalysts which have the potential to be supportive for European equities.

Q2 GDP

Despite shrinking growth in Germany and a flatline in France, there is little evidence of a prolonged slowdown in Eurozone growth, albeit we have seen some moderation. Our proprietary real-time GDP indicators (which are made up of between 55-75 data points) are stable in countries such as Germany and Italy. More importantly, however, is the disconnect between GDP and Purchasing Manager Indices (PMIs), that should give reason for hope. Although Q2 GDP growth has been weak, the PMIs of Italy, Germany and Spain have all been in expansionary territory. We believe the reasons behind the weakness seen in Q2 can be attributed to ahead-of-consensus growth in European GDP in the first quarter. Of course, geopolitical risk has also played a part, particularly in relation to Germany...

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Visit the Neptune European Opportunities Fund Page

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The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. References to specific securities are for illustration purposes only and should not be taken as a solicitation to buy or sell these securities.

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This article was provided by Neptune Investment Management and does not necessarily reflect the views of Citywire

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