'Dismal' eurozone data sparks concerns

European Central Bank chief Mario Draghi is under pressure to launch promised stimulus before the EU slides further

Is Europe heading for another economic breakdown? Euro stock markets struggled this week after dismal economic data from France and Germany added to lingering worries over the Ukraine situation.

The latest figures could build up pressure on European Central Bank chief Mario Draghi to boost intervention in the region to help countries avoid following Italy's recent unexpected slide into recession.

"The eurozone is staring recession in the face once more," warned Ben Brettell, senior economist at Hargreaves Lansdown. "Mario Draghi needs to make good his pledge to 'do whatever it takes' and embark on a quantitative easing programme. Indeed the French Finance Minister has released a statement urging the ECB chief to act."

Mr Draghi launched stimulus measures in June and would prefer to wait longer to give them the chance to have the desired effect, but more bad news could force his hand.

"We're two years on from Draghi's 'whatever it takes' speech and a huge amount of reform has been undertaken," pointed out Tim Stevenson, director, European specialist equities at Henderson.

"Nonetheless, growth seems to be plateauing, and we remain in a pretty low-growth environment. Europe still faces significant problems."

But he added that he believes that European valuations remain reasonably attractive, while profit margins still have a lot of room to improve.

Juliet Schooling Latter, research director at investment funds rating agency FundCalibre, warned: "Europe is no longer the raging bargain it was a couple of years ago, but it still isn't expensive.

"Having said that, there are headwinds. For starters, earnings are very depressed and we do need to see them improve in order for the market to continue to do well.

"Meanwhile, deflation remains a big threat. Even Germany has below-target inflation, and this is constraining economies. Profit margins are also quite low, but this means any pick-up in the domestic economy should boost domestic-facing stocks."

Looking ahead, there are certainly a rocky few weeks to overcome, but further ahead, experts are more confident. "In terms of the potential for European equities, we think corporate earnings should recover from here," said Andreas Zoellinger, co-manager of the BlackRock European Equity Income fund.

"Market expectations for earnings growth have moderated significantly since the start of the year and are now much more realistic. We maintain our projection of 8 per cent earnings growth this year in Europe."

Wouter Sturkenboom, Europe strategist at Russell Investments also remains positive. "European equity markets have experienced something akin to a summer of discontent, started by problems in the Portuguese bank Espirito Santo and continuing unrest in the Ukraine.

"Our European economic growth expectations lowered following the recent sanctions and countersanctions, although not to such an extent as to change our modestly positive outlook on equities."

But Eoin Walsh, portfolio manager at TwentyFour Asset Management advised caution. "We now have a market where many sectors are trading at expensive levels compared to historical averages. but while the ECB continues to provide support and cheap money, spreads are likely to tighten further and bonds are likely to get even more expensive.

"But this support will not continue indefinitely and investors need to remember that cheap financing will eventually end and corporates will have to be able to afford debt at more reasonable levels."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Guru Careers: Application Support Analyst / 1st Line Support

    £25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

    Guru Careers: .NET Developer / Web Developer

    £45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence