Can tentative recovery signs lure investors to Europe?

ON EUROPE

With earnings growth baked-in to equity markets and much of the cost-cutting already done for many corporates, the fundamentals for EU investors are sobering, explains Henderson's Richard Pease.

European equities, along with many other markets, have enjoyed a strong run. The MSCI Europe ex-UK TR index has risen 48% in both sterling and euro terms over the two years to 31 December 2013. Aggregate earnings in the Europe ex-UK region, however, were only up 1.6% last year, and shrank slightly the year before. With the rise in the markets primarily reflecting a re-rating, the question is: can earnings catch up? At this juncture it is probably worth reminding ourselves that two years ago the Europe ex-UK market was very cheap. On a 12-month forward earnings basis, it was trading at ar...