For Europe’s stockmarkets to recover, bank shares need to rally

NOT SO LONG ago, a stockbroker trying to interest an American fund manager in European shares would be met with an eye-roll. But sentiment is fickle and attitudes change. These days the likely response is a hard stare. Over the years in which stockmarket returns in America pulled ahead of everywhere else, any residual feelings for old-world shares had slowly turned to indifference and then curdled into something like hatred.

For what is there to like? The Euro Stoxx 50 index of euro-zone shares is lower than it was 20 years ago. Earnings forecasts have been steadily cut this year. Political risk—from Brexit to Italy’s budget stand-off with the European Union—is never far away and, seemingly, never resolved. “Call me when it’s over,” is the refrain of many American investors. Do not get them started on Europe’s structural defects: its ageing populations, scarcity of world-class digital firms and fragmented markets.

The category of stocks that captures the prevailing euro-misery best is banks. They have everything that makes investing in Europe such a wretched experience. In a dispiriting year for European markets, the shares of banks and financial firms have been among the worst-performing. Even after the selling, they are a fifth of the MSCIpan-European index. The gloom is now so deep that it would take just a few rays...



via The Economist: Finance and economics Business Feeds

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