22 February 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“A rally in global equities has seen both the European Stoxx 600 index and Japan’s Nikkei 225 index hit record highs. European equities have attracted increasing attention from investors in recent weeks as the US has charged ever higher, leaving valuations of global companies listed in Europe looking ever more attractive. While the European economy faces headwinds on several fronts - a still weak industrial base, recession in Germany, and the looming presence of Donald Trump and his talk of tariffs - many of the largest stocks in the index are globally facing, and benefit from far broader trends such as healthcare spending and drug innovation. With market valuations discounting just a fraction of the earnings growth on offer, the opportunity for stock pickers is clearly evident in these conditions.
“Meanwhile, PMI data out today demonstrated that while the large manufacturing sector in Germany is struggling against headwinds from energy prices and a global downturn in the goods economy, tailwinds elsewhere are beginning to be felt amidst improving business confidence. The service sector saw a stabilisation in its recent downward trend, while outside of Germany and France, there was reported output growth for the second month in a row, potentially evidence that the tide may be turning for parts of the beleaguered European economy.
“Similarly, valuations in Japanese stocks remain attractive and we believe this is a market that has finally thrown off its shackles and is now ripe for the evidently increasing attention from international investors. Corporate governance reforms have driven better use of balance sheets, triggering a raft of share buybacks and reduction of cross holdings which is enhancing shareholder returns. Together with an export-focussed economy that has contributed to forecasts of 10% earnings growth in 2024, very close to the expectations for US equities, this is no longer a market to overlook, and we remain bullish about the prospects for this region.”
