US president Joe Biden’s mammoth $1.9trn relief bill has left Europe’s own stimulus efforts looking scrawny, says Johanna Treeck in Politico. Figures from the Organisation for Economic Co-operation and Development show that US pandemic stimulus measures amount to 13% of GDP, much higher than the 7% spent in the eurozone.
That partly reflects America’s lack of a social safety-net, which forced Washington to step in with extra spending last year, Nicolas Goetzmann of asset manager Financière de la Cité told Aziliz Le Corre in Le Figaro. Nevertheless, there is now a “chasm” between US fiscal largesse and Europe’s more cautious approach.
The recovery gap
The result? The European Central Bank projects that the euro area won’t regain its pre-crisis GDP until the second quarter of 2022, a year behind the US. Europe’s policymakers are reluctant to part with their “old economic totems” of budgetary discipline above everything else.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The stockmarket doesn’t seem to mind, says Anna Hirtenstein in The Wall Street Journal. The Euro Stoxx 50 index is up by 7.5% for the year to date, compared with the S&P 500’s 6.5% gain. Italy’s FTSE MIB has returned more than 8%. The continent’s bourses are profiting from the ongoing “rotation” from growth to value stocks.
European markets are heavily weighted towards value sectors such as financials, industrial and energy companies, which jointly comprise 38% of the pan-European Euro Stoxx 600 index. The recent uptick in yields has also boosted the region’s unloved banks.
Super Mario
Despite a “sometimes sclerotic image”, Europe remains “a world leader” in sectors such as luxury goods (Louis Vuitton, Gucci), cars (Daimler) and “high-end engineering” (Siemens), notes Martin Sandbu in the Financial Times. An early push into green policies has helped renewable-energy businesses steal a march on the global competition.
Europe’s growing technology scene is often overlooked, adds Stefan Wagstyl in the same paper. While lacking household names to rival Facebook or Apple, the continent specialises in the “nuts and bolts” of industrial and business-to-business tech; Dutch firm ASML plays a vital role in global chip production. Europe isn’t perfect, but “it’s a lot better than many investors think”. The news is also brightening on the political front, says The Economist. Recent Dutch election results could make one of the EU’s most frugal members “a tad less parsimonious”. New Italian prime minister Mario Draghi is rallying support for much-needed reforms to Italy’s complicated tax code.
Mebane Faber of Cambria Investment Management notes that Italian shares started 2021 on a cyclically adjusted price/earnings (Cape) ratio of 19.8, a discount to Japan. On 18.7, German stocks are 50% cheaper than their US peers. Spain, on 13.6, is even cheaper than the FTSE 100. The lack of any US-style speculative exuberance in Europe, says The Economist, is a plus for investors seeking less GameStop-style drama and more “deep value”.
-
Boom in under-18s pensions as families battle to beat inheritance tax crackdownThe number of children with pensions has jumped as grandparents and parents increase gifting to save their loved ones from inheritance tax bills
-
Barclays launches new £400 switching deal — who is eligible?Barclays has unveiled a £400 current account switching offer, running alongside its £500 ISA transfer deal. Which accounts are on offer, and are you eligible?
-
Pierre-Édouard Stérin wants to make France great againConservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growthPinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with folliesThe best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuationAEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
