European equities aren’t the great value play they once were
European equities aren’t the great value play they once were. We saw a 9% downgrade in Q1 earnings growth forecasts over the quarter, the largest since late 2014, echoing the downgrades we saw in the US. Regardless, results still missed expectations, with 69% falling short of earnings forecasts, after 70% of companies having reported. European equities aren’t the great value play they once were
Overall net income was flat but revenues were the weakest since Q1 2012, ending what has been a fairly good run for European earnings since then.
Its been core Europe where the weakness stems, primarily Germany, Netherlands and France whilst the periphery, such as Spain, Italy and Ireland have held out relatively well.
We suspect that some of the weakness has been due to the resilience of the EUR as much of the weakness has stemmed from more internationally focused sectors such as tech and consumer sectors. Whilst industrials missed expectations, quarter-on-quarter growth in this sector has been the strongest, followed by utilities.
Despite a mixed picture for the banking sector, we are seeing loan growth along with a fall in non-performing loans (NPLs). NPLs have fallen by 2.1% percentage points since this time last year, to 8% which is well below the 13% peak reached in 2014. But bear in mind, 8% is still well above its international counterparts which are all sub 3%.
We still expect the EUR strength to remain in coming quarters and is likely to continue to negatively impact the export market. This comes at a time when European earnings and valuations are now close to their long term trend. We are not saying that the poor earnings season indicates that the European economic recovery has been derailed. However, we no longer believe that Europe is a great value play.
James Butterfill, Head of Research & Investment Strategy at ETF Securities
James Butterfill joined ETF Securities as Head of Research & Investment Strategy in 2015. James is responsible for leading the strategic direction of the global research team, ensuring that clients receive up-to-date, expert insight into global macroeconomic and asset class specific developments.
James has a wealth of experience in strategy, economics and asset allocation gained at HSBC and most recently in his role as Multi- Asset Fund Manager and Global Equity Strategist at Coutts. James holds a Bachelor of Engineering from the University of Exeter and an MSc in Geophysics from Keele University.
ETF Securities expands its short and leveraged offering on London Stock Exchange
ETF Securities expands its short and leveraged offering on London Stock Exchange
• 2015 has seen increased investor demand for ETF Securities’ existing short and leveraged Exchange Traded Product (ETP) suite with global net inflows of approximately US$135 million
• 18 new 3x short and leveraged commodity ETPs and six new 5x short and leveraged currency ETPs listed on London Stock Exchange (the “LSE”)
ETF Securities Group, one of the world’s leading, independent providers of ETPs, has announced the listing of 18 new 3x short and leveraged commodity ETPs and six new 5x short and leveraged currency ETPs on the LSE today.
2015 has seen increased volatility across currencies and commodities and investors globally have demonstrated an increased interest in short and leveraged ETPs, with ETF Securities own platform experiencing US$135mn of inflows year to date.
ETF Securities was the first provider to list European currency ETPs in 2010 and is now the first provider to list 5x short and leveraged currency ETPs on the London Stock Exchange having already launched 3x short and leveraged commodity and 5x short and leveraged currency products in Italy and Germany earlier this year.
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Commenting on the launch, Townsend Lansing, Executive Director – Head of Short / Leveraged & FX Platforms, ETF Securities (UK) Limited, said:
“We are listing these new short and leveraged products on the London Stock Exchange in response to a strong demand from investors. We have seen tremendous growth in our short and leveraged platform across Europe over the last few years.
“The launch of our 3x short and leveraged commodity products and 5x short and leveraged currency products is a natural extension to our existing unleveraged range and offers a greater choice to investors.
“2015 has been a year of heightened currency volatility. We believe the additional leverage will first and foremost allow investors to use the currency products to hedge currency risk as well provide additional opportunities to trade on a short term basis with a competitive total cost of ownership.”
For more information on ETF Securities’ short and leveraged platform and educational material click here.
For more information contact
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
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