Investors who experienced the sell-off this year as the market entered a bear market have been loath to return amid a shaky recovery. Economic data has been falling short of expectations since January and analysts project a 1.6% dip in net income for Stoxx 600 companies for the year. Economic confidence is down for two months and forecasts are for a second monthly decline in consumer prices.
Most European market observers have been critical of European Central Bank President Mario Draghi’s stimulus measures. Specifically, many believe the measures have been too little too late, even after the ECB cut all three key rates this month and expanded quantitative easing.
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While the ECB’s efforts to weaken the euro this year have not delivered on par with investors’ expectations, some market observers still believe the currency is heading for more downside.
“A breakout by European stocks, however, could help prevent the global market from rolling over. As long as one major region is pressing on, the odds of a widespread global collapse is unlikely. Thus, by finally charging ahead, Europe could step into the leadership rotation and fill the void that is threatening to develop so late in the rally,” adds Lyons.
iShares MSCI EMU ETF
