The economic outlook is worst for Europe

European stock markets have rebounded smartly since mid-March. But the outlook for Europe is particularly grim, and the rally's days look numbered.

Like most developed markets, the pan-European DJ Stoxx 600 index has rebounded smartly since mid-March, gaining around 22%. But as is the case elsewhere, the rally's days look numbered. The outlook for Europe is particularly grim. Last week a number of business surveys in the eurozone suggested that the pace of decline may be easing, but the downturn is far from over.

The continent's exporters, such as Germany, have been hit by slumping global demand. Some countries, notably Ireland and Spain, are grappling with imploding housing and credit bubbles. German GDP fell at an annualised rate of 13% in the first quarter, and authorities expect a 6% fall for the whole of 2009. Unemployment in Spain soared from 14% to 17.4% in the first quarter.

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