Wait­ing for euro stocks turn­around a waste of time for JP­Mor­gan

The Star Malaysia - StarBiz - - Foreign News -

HONG KONG: In­vestors hold­ing out hope that this will be the year Euro­pean stocks fi­nally out­pace their Amer­i­can peers are in for yet an­other round of dis­ap­point­ment, ac­cord­ing to JP­Mor­gan As­set Man­age­ment.

“The ar­gu­ment has been that it has un­der­per­formed price wise and un­der­per­formed earn­ings wise, and surely at some point it needs to catch up,” Pa­trik Schowitz, global multi-as­set strate­gist at JP­Mor­gan, said in an in­ter­view in Hong Kong on Mon­day. “Clearly, Europe hasn’t man­aged to do that. Earn­ings have done well, but they’re not bet­ter than else­where.”

Share-weighted earn­ings growth for the Stoxx Europe 600 In­dex is fore­cast to ad­vance 5.2% year-over-year in 2018, while the S&P 500 In­dex is pro­jected to jump four times faster, data com­piled by Bloomberg show. To be sure, the US bench­mark gauge ben­e­fits from tech earn­ings, which are fore­cast to rise 31% this year.

Even so, bullish calls on Euro­pean eq­ui­ties have found lit­tle suc­cess in the years fol­low­ing the sovereign debt cri­sis de­spite the mon­e­tary stim­u­lus, a weak cur­rency and the re­gion’s eco­nomic re­bound. Europe is one of the “less pre­ferred” mar­kets for JP­Mor­gan as it scouts for op­por­tu­ni­ties in the US and emerg­ing mar­kets, Schowitz said.

“The more you dig into this out­per­for­mance ar­gu­ment the less solid it looks,” he said. “That’s one we’re push­ing back against.”

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