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ANALYSIS: Time to top up on European equities

Today’s eurozone data certainly gives investors something to think about. Should the action that follows this thinking be a raising of your European equities weighting?  

“We are mindful of the potential opportunities that eurozone equities could offer this year and will be looking for times to add to our European exposure given the potential for political events to create volatility in markets,” Sweeney continued. “However, it is important to note that overseas investors will be slower to reallocate, in a similar way to how flows have only recently begun to return to the UK in significant waves at the start of this year. The reality is allocators will be underweight Europe and this will take some time to shift, even with more positive numbers emerging.”

Azad Zangana, senior European economist at Schroders, was also upbeat. “Following more positive signals from leading private business surveys in recent months, official data today confirmed that the eurozone economy continues to go from strength to strength,” he said.

He also offered some soothing words on the eurozone inflation numbers. “Inflation data for January showed prices are rising at their fastest pace since February 2013. The main reason for the rise is the passing of base effects caused by low energy prices at the start of 2016, but also rising food price inflation. When excluding food, energy, alcohol and tobacco, core inflation is still low at just 0.9% year-on-year – unchanged from the previous month’s estimate. This suggests that the spike up in inflation is likely to be temporary, and policymakers should not attempt to tighten monetary policy in reaction.”

 

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