European shares are unloved right now. For two months running, fund managers surveyed by Bank of America Merrill Lynch have named “short European equities” as the most crowded trade, while many remain underweight the region.
The potential breakup of the euro has been a permanently armed grenade under the bed of the global economy for almost two decades. The recent Italian elections driving yields up and the euro down reminded allocators that European risks have never really dissipated. Every time a eurozone election goes the way of populists, threats to the cohesion of the group increase and the discipline required to maintain the monetary union becomes harder to sustain. Meanwhile, the euro’s status as a global reserve currency is constantly undermined.
European stock markets were widely tipped to shine in 2018, but so far it has been a year to forget for the continent.
Data from Europe indicates a return to growth in the third quarter of this year, but investors are being warned against undue enthusiasm.
Europe could face a long period of deflation that threatens to lock the economy into a spiral of decline, argues Heather Connon.
UK GDP grew 0.7 per cent in the second quarter of the year, meeting analyst expectations despite the current economic slowdown in Europe
Slow economic growth in Germany, France and the eurozone as a whole between April and June could signal that Europe is heading back into recession.
The European Central Bank has cut its benchmark rate of interest to a record low of 0.25 per cent.
Ben Lofthouse, fund manager of the £63 million Henderson International Income Trust, says global stock opportunities are plentiful in Europe.
The European Central Bank has cut interest rates to a record low of 0.5 per cent.