Invesco Upbeat On European Equities

Joseph Milton

18 April 2011

Invesco has released its Henley European Equity Team’s monthly summary, painting an optimistic picture of the future for European equity markets.

According to the report, fiscal austerity measures across Europe are paying off - with the result that the crisis in the eurozone is nearing a resolution.

Although Luke Stellini, European product director at Invesco Perpetual and author of the note, said equities were unlikely to return to pre-2008 “normality”, Invesco analysts felt “the end of the euro crisis is at hand”. Resolving the debt crisis would remove one of the main reasons why the risk premium on European equities has remained high, said Stellini.

The analysts do not expect Spain to require a financial bail out, as happened in Ireland and Portugal, because the country’s loans represent a much smaller proportion of GDP than in either of those countries. A relatively low proportion of Spanish banks are in trouble and structural reform has added credibility to Spain’s ability to address its deficit, the report said. The country is also benefiting from growth in exports and tourism.

The analysts said that high risk premiums, low investor participation, and undervalued companies that are performing well all suggest that now is a wise time to invest in European equities.