24 February 2020
Eurozone manufacturing (e.g. Germany and France) appears to have hit a near-term bottom in 2019. Furthermore, on Friday 21 February, eurozone PMIs came in above expectations, led by German manufacturing, which registered a 13-month high of 47.8 versus the street consensus of 45.0 (and previous level of 45.3). 1
Moreover, The ECB has replaced the technocratic Mario Draghi with the diplomatic Christine Lagarde. With this change, market participants are becoming increasingly optimistic that Lagarde can successfully lobby for fiscal stimulus, in countries such as Germany, to stimulate growth. While negative interest rates in Europe have helped stabilise the manufacturing sector, market participants are looking for new (fiscal) investment to stimulate demand, which can help growth.
Investors are now questioning whether 2020 can bring about a long-anticipated convergence in the eurozone (relative to the US), and with most of the remaining headwinds baked into current valuations, this could present an opportunity for European equities.
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How to play this theme:
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