The latest Eurozone GDP data does not make pretty reading with Germany’s falling 0.2% in the second quarter and France’s GDP was a flat.
Russell said that after gaining 6.8% in the first half of 2014 its Developed Europe index has fallen away sharply to a loss of 3.7% in the third quarter so far.
The index is being particularly dragged down by Portugal (-20.3%), Italy (-7.7%) and perhaps surpsingly Germany (-7.7%)
The United Kingdom is also down -1.2% in the third quarter so far but this compares favourably to its continental neighbours and the parent index (-3.7%).
“European equity markets have experienced something akin to a summer of discontent, started by problems in the Portuguese bank Espirito Santo and continuing unrest in the Ukraine,” Russell investment strategist Wouter Sturkenboom said.
“Our European economic growth expectations lowered following the recent sanctions and countersanctions, although not to such an extent as to change our modestly positive outlook on European equities,” Sturkenboom continued.
“The Italian equity market has felt the effect of Italy slipping back into recession and German equities have suffered this quarter, the UK equity market while down slightly this quarter has been helped by having less exposure to Russia and a national economy that continues to do well,” he added.
“Today’s weaker-than-expected numbers are a clear reminder of the fragility of the Euro area growth story,” said Anna Stupnytska, global economist at Fidelity Worldwide Investment. “Looking towards year end, we continue to expect a challenging growth environment with the region lagging behind the rest of the developed world as the post-crisis adjustment continues,” she added.