Opportunities still around but watch out for further setbacks

European equity markets have rebounded strongly since hitting lows in early March as the economy has recovered more rapidly than forecast and financial markets have begun return to some sense of normality as the credit crisis has eased.

The economic recovery has been driven both by the unwinding of the inventory cycle as companies have started restocking following the collapse in orders at the end of 2008 and the positive impact of monetary and fiscal stimuli. In general, the economic position in Europe compares favourable with that of the UK and US. While some countries such as Ireland, Spain, Portugal and the Baltic States may have experienced consumer and housing booms, the core European economies including Germany and the Scandinavian economies experienced far less of an expansion in consumer credit and are in stron...