Eurozone: Between euphoria and despair

EUROZONE

Investor confidence in Europe has been constantly eroded by a series of crises over the past few years. Now, at the start of its recovery, Andrew Parry, CEO of Hermes Sourcecap, says it is important not to panic over a market correction.

Hope is an enduring human trait. Last year was definitely the triumph of the optimists, with almost the entire rally of stocks in the region coming from re-rating, rather than from profit growth or positive earnings revisions. Undoubtedly, the second derivative of change for the beleaguered eurozone economy, and the peripheral countries in particular, went from significantly negative to positive. But is this sufficient to justify the hope now implicit in newly elevated stock prices? Conflicting information The earnings reporting season will challenge the resolve of eurozone investor...