“Those struggling to break bad habits should take inspiration from the eurozone,” says The Economist. The currency bloc blundered its way through the financial crisis, but this time around the response has been swifter. The proposed €750bn “EU Recovery Fund”, to be financed by common borrowing, may be a first step towards easing imbalances between the north and south. The European Central Bank (ECB) has soothed markets with more than €1trn in emergency bond purchases.
Why European stockmarkets lag the US
Covid-19 has hit Europe hard. Credit-ratings agency Scope Ratings thinks that it may be 2022 before European countries return to 2019 levels of output. Nevertheless, things appear to be on the mend. Positive purchasing managers’ surveys this week from Germany, France and the UK look consistent with “a textbook V-shaped recovery” for now, says Carsten Brzeski of ING. The narrative around European shares is brightening, says Morgan Stanley in an investment note. The continent’s assets have been trading on a discount since 2010 because of “lingering fears” about a eurozone breakup. The proposed EU recovery fund may put that concern to bed.
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 other market catalyst is Germany’s unexpected conversion to fiscal stimulus, says Joseph de Weck for Foreign Policy. When Europe’s biggest economy spends “not only German boats are lifted”. Germany is the UK’s second-biggest trading partner, so British exporters should enjoy some uplift too. British shares are also cheap compared with their continental peers. Dividend cuts and uncertainty over Brexit have soured sentiment towards the FTSE, says Ian Cowie in The Sunday Times. That creates a chance to buy low. With British stocks being “rubbished by the herd”, contrarians and value hunters will spy opportunity. The UK still offers one of the best dividend yields in Europe and hosts many “quality companies” with diverse global revenues, says Teodor Dilov of Interactive Investor.
The value opportunity is indeed historic. Duncan Lamont of Schroders notes that on a trailing price/earnings, price/book and dividend yield, basis UK shares are trading at a 10%-20% discount to their 15-year median. Only emerging markets come close to such a large discount. With global stocks so pricey, the UK offers a rare pocket of value.
-
Reeves warned against property tax shake-up – 3 ways it could backfire on first-time buyersRachel Reeves reportedly has her eye on high-end property taxes in the upcoming Budget, but there are concerns a shake-up could unintentionally hamper those trying to get on the housing ladder
-
Average Brits want to retire five years before they can – who has the widest retirement gap?Brits are expecting to work for longer than ever but there are big disparities in the number of extra working years predicted. A small tweak could help close the gap
-
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?
