Ever more asset managers are saying it is worth buying European shares on valuation grounds alone, even if the region's public debt is at crisis levels.
“Already in January the output component of the global purchasing managers index surprised positively as it rose for the third month running. One can surmise from the report that the global recovery is broadening.”
Verhagen pointed in particular to positive data for domestic demand in Germany as unemployment falls. “German domestic demand will probably be the most important upside risk for the outlook on the eurozone.”
Not everyone is so upbeat, of course.
Speaking ahead of the troika’s final decision on disbursing €130bn to Greece, RCM’s Dwane said: “My view on Greece hasn’t changed: it is still bust. If they aren’t bust in the next couple of weeks they will be bust in the next few months or years. What we have seen particularly dramatically in the last couple of weeks is that the market decided now that Portugal, too, is bust.
“The outlook for Europe, therefore, remains one of austerity on the one hand against improving economic efficiency and competitiveness on the other. It has taken Italy 20 years to get itself to where it is – I see no reason to think that it will take less than that for Italy to become more efficient and more competitive. Italians are currently 20% less effective than Germans.”
But Luke Stellini, European and global product director at Invesco Perpetual, said Europe’s equities remain “very attractive in more cyclical and less economically sensitive areas” despite predicting low growth as deleveraging continues.
January provided high growth, in terms of stock prices, at least, with the Stoxx 600 rising more than 4%.
But the top six stocks hinted at what drove the rally – banks, and more specifically the European Central Bank’s offer of three-year loans at 1% to the sector.
National Bank of Greece made 90%; KBC Group 50%; Bank of Ireland 43%; Commerzbank 41%; Banca Popolare di Milano 38%; and Royal Bank of Scotland 32%.