The stock & the bond markets throughout Euro zone are enjoying massive flow of funds this year, especially aftermath of the announcement of bond purchase programme by European Central Bank (ECB).
Stocks -
- Investors' sentiments towards Europe have increased substantially on the back of improving growth outlook, weaker euro, cheaper valuation & bond purchase by ECB.
- According to data compiled by EPFR global, European equities registered largest ever weekly fund flow of $ 5.8 billion last week.
- After last year's lagging performance European equities are shining bright this year. EuroStxx 600 which increased 4.4% last year returned more than 12% YTD. German DAX has sailed into new record highs.
- Nevertheless stronger countries experienced better flow. German equities alone experienced flow of $ 21 billion YTD.
- According to Reuters & UBS data, earnings outlook for the European companies have improved this year. 45% of the EuroStxx 600 stocks have beaten estimates compared to failure by 18% in fourth quarter.
Bonds -
- Bonds have been enjoying similar trend that of stocks.
- Bond yields continue to fall across board. Even the troubled countries are enjoying yields at levels that usually remain for safer countries.
- 10 year bond yield in Ireland has fallen for consecutive 11 days & currently trading at 980 basis points below that of US treasury.
The positive vibe is expected to continue in Europe and Euro to remain well bid in near term. In short term Euro could even recover some lost grounds against dollar. The medium term outlook for Euro remains bearish.
