Speaking at a press roundtable on Wednesday, Gaskell said that although many eyes are focused on the European elections set for tomorrow, there is unlikely to be a massive change in the makeup of the parliament.
“A continuation of the grand coalition in the centre is the most likely outcome,” she said, but added that over the last few years the EU parliament has not really been driving the agenda, the European Central Bank is and has been the key.”
The big question is whether or not the ECB will use Quantitative Easing or some other form of stimulus.
A number of media reports are swirling today based on documents leaked to German Magazine Der Spigel saying that the ECB is considering a move to negative deposit rates. Whether or not this is the direction it will take will only be known on June 5.
According to Gaskell, in BlackRock’s view, the ideal would be a move toward some kind of directed credit toward SMEs which will help job creation and economic growth.
Irrespective of the ECB’s decision in June, however, longer term shifts have already taken place on the continent that are worth noting. “Since 2011, there have been changes in leadership across the region with the exception of
Angela Merkel; Europe is now under new management. And, importantly, markets in Europe have moved on,” Gaskell added.
But, while bond markets have recognised this long term shift, Gaskell, and her co-manager at the BlackRock
Continental European Income Fund, Andreas Zoellinger, believe that there remains a great deal of growth to come though, if the economic recovery takes place as expected.
“The current state of the European economy, reminds me of where the UK was a few years ago, the leading indicators are pointing toward recovery, but no one really believes it is happening just yet,” she added.
But, while the fund group is bullish on the regions prospects, it is by no means a case of a rising tide lifting all boats. While there is a lot of room for European corporates to catch up in terms of earnings, capex and dividend growth, the key going forward, is going to be choosing the right stocks in which to invest.
