GLOBAL - Europe's recovery continues to sag especially in the region's traditional powerhouse, Germany, according to the latest research from Barclays Global Investors.
Following a relatively quiet August, BGI’s September market outlook says that although German business confidence soared during the early part of the year, it now looks as if industrialists may have got a little too excited too soon, with expectations now sliding back into line with actual orders.
“As a result the markets are now wondering where European growth is going to come from,” says BGI’s chief economist, Haydn Davies.
“In recent months, European markets have fallen especially hard despite having been spared the accounting scandals that have beset the US , and now look oversold. But weak demand at home and a slowdown in overseas sales do not bode well for European firm's profits’ and investment analysts are very pessimistic.”
Davies also explains that while European stock markets should recover, it is hard to see them matching gains on other markets. Generally, stockmarkets are expected to regain confidence gradually over the coming months, as more investors try and take advantage of cheap valuations.
Elsewhere, US consumer confidence continues to slide. While investors feel less suspicious about corporate accountants, the economic outlook continues to weigh on the market. And if overseas sales wane, the Japanese economy is likely to suffer too. But BGI is confident that the valuation offered by Japanese equities after the recent price-slide suggest that the Tokyo market should be one of the best performers in the coming months.
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