ERPF June Factsheet Now Available
In the UK, the equity markets recoiled from the fallout from the BP oil spill disaster and the knock on impact to dividends as billions were wiped off the face of this company’s market capitalization. Also, public sector fears abound as the UK Coalition Government calls an emergency budget with huge cuts in public spending and tax rises a cast iron certainty. Meanwhile, the ECB led “stress tests” on European banks suggest continued weakness in some quarters.
Given the continuing market uncertainty, the ECB is not expected to either tighten monetary policy or limit its generous liquidity provisions over the coming months. In fact, many euro-zone banks are struggling to secure funds from the wholesale markets and with growing concern about the sustainability of public finances and the health of Europe’s financial system, some banks have started to hold cash at the ECB instead of lending it to their peers or onto many cash strapped Corporates – not good news.
With particularly the UK and Germany expected to aggressively cut public spending whilst others, concerned about double dippingrecession, cut their deficit with less vigour, many observers are asking how this less than unified approach to deficit reduction will impact the Eurozone.
Whilst from an investment perspective the first half of 2010 has not inspired, at least European Governments and markets alike have at long last acknowledged the parlous state of the European economy and accepted that it is quite likely to be a tough and long haul back to recovery. So as we head into the second half of 2010, many investors are likely to have to remain patient and, most likely, extend their investment return expectations towards the longer term.
More information is available in the ERPF June 2010 Factsheet
