Global Weekly: Room for optimism

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970x404 strong fundamentals

Equity markets gained further territory this week, especially in Europe. Bond yields – moving inversely to prices – also rose, as demand for safe havens declined.

We have recently become more positive over the outlook for stocks. Political risks have now abated, and the economic recovery in Europe is strengthening. We therefore suggest that clients consider building their stock positions in line with renewed optimism for equity markets.

Macro update
The eurozone economy probably continued to grow robustly in the first quarter of this year. Eurostat, the statistical office of the European Union, on Wednesday published its preliminary estimate of first-quarter GDP growth. According to Eurostat, the eurozone economy grew by 0.5% quarter-on-quarter, which is in line with our expectations. 

Zooming in on the components of GDP (which will be published in early June), we think that private consumption growth slowed down in the first quarter, due to a combination of a jump in (food and energy) inflation and modest wage growth. Still high levels of business confidence and improving corporate profitability should have supported investment in the first quarter of the year. Finally, exports should have benefitted from global trade gathering traction and the decline in the trade-weighted euro since the middle of last year.

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