How much do investors risk from European recession?
Financial markets/economy
Posted by MoneyController on 17.10.2024
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How prepared would the markets be for the scenario of a recession in Europe? For some analysts, perhaps European markets are discounting this eventuality too little (or not at all).
Forecasts on the trajectory of the European economy remain uncertain. There is no shortage of risk and destabilisation factors: from ongoing wars to the slowdown of crucial economies such as Germany. But despite this, markets are close to their highs. As revealed in an article by Sara Silano published by Morningstar, there is a risk that markets are underestimating the probability of a recession.
In this regard, Silano reports the opinion of some experts. IG Italia's senior market strategist Filippo Diodovich believes that markets are expecting a possible economic slowdown, but do not seem to be taking the scenario of a recession seriously. This situation, however, is not so unlikely, as some indicators, including the PMI indices, show weakness in the industrial sector.
There are, however, analysts who are less pessimistic. This is the case of Steven Bell, chief economist EMEA at Columbia Threadneedle Investments: the chief economist considers the elements of weakness in the European economy (Germany's slowdown and the difficulties of the manufacturing sector); but he also looks favourably on the construction sector, which can now benefit from the ECB's rate cut.
Marco Piersimoni, co-head Euro multi-asset at Pictet Asset Management, gives an explanation of why markets are up today despite the unknowns that dominate Europe's future economic trajectory: ‘One of the most important reasons is that,’ Piersimoni explains, ‘some large and important European companies have an international dimension, and can therefore base their profits on other markets. However, the European market also counts, so it is Piersimoni himself who recalls how, today, the European market (both the stock and bond markets) still does not discount the scenario of a recession.
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