Eurozone equities’ strong start to year

EurozoneEurozone equity markets showed a return of 4.2% in January with Portugal leading the way.

Portugal returned 11.7% in the year-to-date January 30, according  to the Russell Eurozone Index.

The positive performance comes against a backdrop of continued talk about a rotation out of bonds and into equities.

Dynamic-oriented stocks outperformed defensive-oriented stocks in January, with the Russell Eurozone Dynamic Index returning 5.1% and the Russell Eurozone Defensive Index returning 3%. This continues a pattern established in 2012.

Joel Copp-Barton, European product director at Invesco, says the “persistently negative sentiment towards anything European” is providing some compelling stock-specific opportunities.

Meanwhile, a better economic environment is developing, he says, thanks to the European Central Bank’s liquidity injections, the reversal of significant imbalances in certain periphery countries, and a lower level of fiscal consolidation in Europe. These should all be supportive of European equities in 2013, Copp-Barton says.

“Assuming this less negative macroeconomic environment in Europe and better growth prospects in the rest of the world, European companies should fare better.”

EPFR Global says the equity funds it tracks attracted another $18.7 billion (€13.7 billion) during the final week of January, “closing the books on a month when they outgained bond funds by a nearly 3-to-1 margin and fueled talk of a great rotation from fixed income assets to equity”.

©2013 funds europe