Improving economy gives European equities a boost
Preference for European equities is at a record high, according to a BofA-ML survey of global fund managers
European shares have been on a tear and the most recent Bank of America Merrill Lynch (BofA-ML) survey of global fund managers found preference for European equities is at a record high. That bullishness seems to be borne out by the Flash Eurozone Composite Output index for March, which is at a 46-month high.
As Chris Williamson, chief economist at Markit said, “the ECB’s (European Central Bank’s) quantitative easing has been started at a time when the eurozone’s economic upturn is already starting to gain traction. This augurs well for the region to enjoy further improvements in business conditions as the year proceeds, helping drive greater business investment and hiring, and thereby ensuring that the recovery becomes sustainable."
The weak euro seems to be helping, but what is most noteworthy is that growth has continued even as the Greek problem continues to fester.
Given the improvement in the European economy, funds may continue to pour into European equities, at the same time that bond funds have been moving out of Europe because of the negative yields there. The BofA-ML survey found that a net 63% of survey respondents want to be overweight on Europe for the next year, the highest level ever.
From the emerging markets and Indian point of view, a revival of the European economy will be a welcome to languishing exports.
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