Inflation and interest rates determinants of Europe's future phase

After a strong performance from most equity markets since the lows of March 2009, it is reasonable to expect a degree of consolidation in the short term.

In addition to corporate earnings, the principal determinants of the future direction of European stock markets are set to be interest rates and inflation. Risk appetite has improved in the market, which has allowed companies to raise finance through the bond and equity markets. In an environment where bank lending remains muted, this has been an important support. The economic backdrop remains strained – there has been an improvement in sentiment, but how that translates into real growth it is too early to say. There are still many problems affecting diverse areas of the Continent. On t...