Positive signals for future corporate health

ON EUROPE

The European corporate profit cycle has been more benign than expected.

Company CEOs have been forced to make some tough decisions on costs in the recession, but one positive corollary of strong discipline is companies are able to maintain profitability during a period of declining revenues. One of the key issues in 2010 is the outlook for policy stimulus and the extent to which private-sector demand can replace it. The gains experienced in European equity markets so far have been aided by unprecedented levels of government stimulus and low interest rates, and many investors are wondering whether this can be maintained. In particular, there are clear structu...