Head of multi-asset investment Paul Niven said growth data from core countries such as Germany, France and Italy has been disappointing and the ECB’s efforts to tackle the undesirably low inflation could be stymied by the current weakness in commodity prices
There is also renewed concern about the European banking system and other short-term headwinds such as the strength of the euro and the economic sanctions against Russia, Niven explained.
In contrast, emerging markets equities have largely been bypassed by the ‘risk off’ move in markets and shares have made ‘decent progress’ Niven said. Investors appeared to have ‘woken up to the appealing valuations’ and confidence has been buoyed by economic reforms in China, India and Mexico, he added.
On the fixed income side Niven said recent weakness in credit markets has been short-lived despite rising geopolitical tensions and ‘stuttering performance’ of the Eurozone and Japanese economies.
Niven said F&C continues to favour Japan despite very disappointing GDP figures for Q2 dues to optimistic that growth can bounce back in the third quarter after a temporary set-back stemming from the consumption tax. Robust earnings growth, a weakening yen and attractive share valuations make the Far Eastern nation a good bet still, in Niven’s view.
