According to Invesco Perpetual, the European Central Bank governing council's decision to provide financial support alongside the European Financial Stability Mechanism to countries requesting assistance could help to lower risk premiums for European equities.
Invesco's European equity team said the risk premiums on equities could fall in the near term, as they were currently "extremely elevated", relative both to their historical levels and the US market. Joel Copp-Barton, European product director at Invesco, said: "Investors have tended to put certainty and low risk at the heart of their investment strategies in recent times, with other areas largely ignored. We would argue that depressed valuations already assume a challenging macro environment going forward. More confidence in the ECB and the key policymakers could be supportive generally for European equities, but some areas of the market have been even more de-rated than the European market as a whole."
Copp-Barton said policymakers' recent actions would build a framework for addressing the high level of sovereign spreads in peripheral Europe, but he added that much of the detail still needed to be worked out. He said the ECB's move should give peripheral governments more time for structural reforms and fiscal consolidation.
Full article
© IPE International Publishers Ltd.
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article