Eurozone bailouts will likely fail

ON ASSET ALLOCATION

Investec's Max King and Philip Saunders say Europe remains a big worry for equity investors.

A drop in commodity prices, though partially reversed subsequently, has led to an easing in concerns about inflation and a drop in government bond yields. It should also be a positive for equities in that it relieves concerns about global economic growth and pressure on margins, but equity investors have found an alternative worry – the eurozone. Attempts to rescue the eurozone through bailouts are likely to fail – the longer that takes, the worse the fall-out. Its effect on economies and markets depends largely on the consequences for the banking system. However, much is discounted i...