Europe
European stock markets are likely to remain subject to further volatility given the fragile state of Europe’s economies. While Germany should continue to expand, France appears to be stalling. Investors are also jittery as the region’s recovery is still weak, especially in the peripheral economies. This is leading to ever-increasing pressure on the ECB to launch quantitative easing.
Asia Pacific including Japan
The Bank of Japan’s most recent assessment of the economy suggests a moderate improvement in consumption. But the quality of the recovery is mixed: wages, a key proxy of consumer spending, is seeing muted growth, which could hurt consumption in the longer term. At the corporate level, it has been encouraging to see the administration’s push for better corporate governance and drive to incentivise companies to improve shareholder returns. This has been reflected in the formation of the JPX-Nikkei 400 index and the introduction of a Stewardship Code.
Emerging markets/China
After a difficult 2013, emerging market equities are on a firmer footing. Current account deficits of several developing economies deemed vulnerable to shifts in global liquidity have also narrowed – albeit at differing speeds – paving the way for a cyclical rebound. In addition, prospects for reform look bright and corporate fundamentals remain attractive. However, volatility may resurface in the face of patchy global economic growth, heightened political tension and the actions of the US Federal Reserve and ECB.
Nyree Stewart is features editor and Ellie Duncan is deputy features editor at Investment Adviser
