European equities seal the fourth consecutive month of gains


European equities have registered their fourth consecutive month of gains as confidence in the region’s economic recovery grows and its vaccination program accelerates.

MSCI’s broad equity measure in Europe has risen nearly 4% since late April, rising 12% in US dollars to 12%. Courses in Frankfurt, Paris, Madrid, Milan and London have gone up this month.

Although the vaccination program in the EU lagged far behind other regions, efforts by major countries to accelerate deployment have boosted confidence in traders. At the same time, economists predict a sharp economic rise this year.

As a sign of the improved outlook, the latest economic sentiment indicator survey released by the European Commission on Friday showed that eurozone confidence in May was “markedly above its average and pre- long – term pandemic “.

ESI data “confirmed that the eurozone economy is recovering rapidly from the blockages as vaccinations increase and the summer season is approaching,” said Daniela Ordóñez, an economist at Oxford Economics.

Shares in Spain and Italy, two countries that suffered strong success during the peak of the coronavirus crisis, have had a particularly positive return this month. MSCI indices in Spain and Italy rose about 6% in May in dollar terms. Yields were flattered by the strengthening of the euro against the dollar this month.

Investors and economists have a similar bloodline outlook in the UK, where the deployment of coronavirus vaccines has been faster than in continental Europe and the government has raised many social boundaries.

“We continue to believe that British equities in general offer good value to global investors,” said Sharon Bell, European strategist at Goldman Sachs. “Since the beginning of this year, we have seen the strongest inflows of foreign investors into British equities since 2016, at least.”

The British MSCI index gained 3.4% in May, an increase that was fueled by a sharp rise in the pound against the US dollar.

Shares in the UK and mainland Europe also appear less expensive than those on Wall Street, which has made these markets look more attractive, investors said.

According to Goldman Sachs, MSCI’s European equity index is trading around 17 times the expected profits over the next year. This is higher than the average of the last ten years, but much less expensive than US stocks trading at about 23 times the expected earnings.

Bar Chart of the Price / Profit Ratio showing the trade of European markets at less expensive valuations than the US

Bank of America said in a note last week that it remained “positive on European equities” even after this month’s strong gains. The bank has suggested that customers take “overweight” positions in stocks that tend to be related to the performance of the economy, such as banks and luxury goods sellers, as the region’s economic recovery picks up pace.

Trade on Monday fell, with the UK and US closed on holidays.


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