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EU Equities Blossoming in April

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EU equities continue advance

EU equities (EFA) extended their gains last week and continue trading at an all-time high. The stocks appreciated by 1.6%, mainly backed by positive indicators including German industrial production, a weaker euro, and the QE (quantitative easing) program introduced by the ECB (European Central Bank).

German industrial production rose in February, beating forecasts and providing further support to equities in the EU region. The ECB’s QE involves the purchase of $60 billion bonds every month. Corporates in Europe are taking advantage of cheap financing, lower oil prices, and a weaker euro.

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Healthcare, retail, and construction

The biggest contributors toward the rally in EU-based equities were the healthcare, retail, and construction sectors. This trend clearly supports consumption in as well as exports from the region.

Aside from German stocks, recovery has been seen in Portugal, Greece, and Switzerland. To date in 2015, MSCI Europe has outperformed US (SPY), emerging (EEM), and other major markets. Investors see the current rally as the beginning of a bull era in the EU that could last for the next few years.

These are a few factors that could affect the performance of EU equities in 2015:

  • The strong US dollar could help export-driven economies in the EU.
  • Full QE, as announced by the EU, should help banks and industries.
  • Expected low rates for the next few quarters should help combat deflation fears in economies outside Germany.

Stock market performance is one of the key drivers of an asset manager’s revenue. This flows down to earnings and share prices. Major asset managers in the EU region include BlackRock (BLK), Allianz Group (ALV), Deutsche Asset & Wealth Management (DB), and UBS Group (UBS). All have see gains extend into the beginning of April.

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