Britain lags behind as Germany and France report economic growth

British pride has taken a knock recently as both Germany and France this month reported their economies had expanded for the second consecutive quarter. Britain is pinning its hopes on the Q4 of 2009 bringing an end to its recession.

Continental Europe appears to have fared relatively well through the credit crisis, helped in part by relatively low debt levels and Germany’s sensitivity to recovering global growth. Stock markets have responded accordingly, with the FTSE World Europe ex UK Index up 58% in sterling terms from its low in March to 15 November 2009. Despite the rally, European stocks remain inexpensive. The Graham & Dodd price/earnings ratio, which takes into account earnings cycles and inflation, shows that European valuations are near a generational low. While history cannot necessarily be a guide suc...