Investors will be more discerning with stock selection into 2010

European markets were remarkably volatile during the first half of 2009, mainly due to the ongoing fall out from the global credit crunch.

However, since mid-March, European equities have recorded one of the largest and quickest rallies ever experienced. A combination of falling systemic risk, signs of stabilisation in the global economy and aggressive cost cutting by management protecting margins has provided a supportive backdrop to enable the sharp rally in European equities. The rally has been driven by those stocks that had fallen the most over the previous six to 12 months, namely financial, commodity and industrial stocks. On the other hand, defensive sectors such as utilities, healthcare and telecommunication servic...