Europe debt and equity to overtake US
The bond and equity markets in Europe are set to outperform the US over the next two years as the two region?s economies diverge from each other, according to a report from ABN Amro.
Hedge fund strategist Julien Garran says that US productivity growth has reached a peak but will continue in Europe as German corporates accelerate cost-cutting and EU accession brings relocation and outsourcing opportunities.
A global slowdown over the next couple of years will hit American companies hard because they have been highly risk averse in a period of strong growth, but will be less problematic for Europe as negative pressure on unit labour costs, particularly in Germany, will keep the euro-economy buoyant.
Meanwhile, a further depreciation of the dollar against the euro will reduce capital inflows in the US and interest rate policies will reverse in the face of the global downturn.
In his report, Roadmap to De-coupling, Garren puts much store by the potential for the German economy to achieve productivity growth and drive the European economy, pushing both the debt and equity capital markets.