Sentiment driving European markets
Credit Suisse’s has issued its outlook for European equities and the investment themes it is following in these difficult times for financial markets.
Cesar Perez, head of European equities for asset management, said: “We believe that valuations in European equities markets are attractive in both absolute and relative terms, and that companies in Europe remain in a healthy position with generally low levels of gearing and strong balance sheets.
“However, credit markets need to stabilise or they could have an impact on the real economy. We believe that volatility is here to stay and it brings with it opportunity, although in such an environment, stockpicking is key. In the coming months we will be looking for opportunities to buy companies with good fundamentals and earnings visibility at attractive prices.”
The sell-off in equities has been a global phenomenon as markets continue to be driven by fears of a US recession and the subsequent impact on the rest of the world.
Unfortunately, economic growth appears to be slowing globally. European indicators are also on a downward trend. Manufacturing data on order books and inventories has turned lower and there are also concerns about the consumer. However, Credit Suisse believes that the corporate sector could provide some support.
Perez added: “It is all about sentiment at the moment; markets are being driven by fear and uncertainty. This means that fundamentals are being ignored. Not only is there uncertainty surrounding global economic growth, but there are still ongoing concerns about the state of the financial sector.
“Many people are predicting that the worst of the financial sector crisis is behind us. However, while this may be the case, the problems will not disappear overnight. The uncertainty surrounding the sector could be with us for longer than many are expecting.”