Europe – Uncertainties cast a shadow over the market | Harris Fraser
Research Insights
22 October, 2020
Europe – Uncertainties cast a shadow over the market

Following global markets, European equities echoed weakening global investment sentiment in September. Partly driven by the US election uncertainties, the European STOXX 600 Index slightly fell 1.48% (3.31% in US$ terms) over the month.

While the recent economic fundamentals in Europe seems to stay on the recovery track, it is still treading a fine line. The recent COVID re-emergence is definitely one of the major concerns on the continent, with countries like the UK, Spain, and France reporting higher daily infection figures than the 1st wave. Lockdown measures are being implemented in some of the harder hit regions, prompting market concerns over the impact on the barely recovering economy.

Even though fundamentals do show continued improvement, the real economy is still rather fragile. This is further compounded by the uncertainties arising from a likely “No Deal” Brexit, and heated debates over the EU Recovery Fund, both which are expected to further dampen the weak recovery. As corporate earnings growth remains on the weak end, we would refrain from overweighting in European equities, only to select certain growth stocks with greater potential, after the US elections uncertainties dissipate.

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