Devlin said European policy is likely to become more focused on economic growth and employment looking into 2014, which should help economic progress in the region. He addsed he is “encouraged to see ongoing progress towards a closer union in the eurozone, with further moves towards creating a banking union coming into force at the end of 2013”.
Devlin believes the fiscal drag in the Eurozone should ease significantly by the end of the year: "While the future remains muted in terms of GDP growth prospects, it is relatively better than it has been over the past two years, which is encouraging. However, credit conditions remain an important factor for the Eurozone, with financial transmission mechanisms remaining stressed… the European Central Bank and Bank of England have confirmed rates will stay low for longer which has led to investors regaining composure and prompted markets to rally. The macroeconomic picture remains mixed, but a feature of this year is better momentum in developed markets versus worsening economic momentum in China and other emerging markets.”
Data from the AIC shows the Europe and European Smaller Companies sectors have outperformed the average investment company significantly over the past 12 months, but it nevertheless remains a higher yielding market.
Alexander Fitzalan Howard, co-manager of JPMorgan European Income Trust, said: “The current yield on the MSCI Europe ex UK index, at around 4%, is above the long-term average, above the yield on government bonds, and dramatically higher than the negligible yield available on the money markets. Across all regions, Europe currently stands out as offering the highest dividend yield… Not only that, but there is scope for dividends to grow. Corporate balance sheets have been repaired, leverage is down to pre-crisis levels, and dividend cover is robust."
He also said that banks are now coming back onto the dividend list as they start to return excess capital to shareholders.
