Will Europe's markets now pause for breath?

ON EUROPE

Europe's equity rally has come on the back of improved economic data and a calmer political backdrop. But while the worst may be over, the outlook may not be optimistic enough to warrant further climbs, said Neil Wilkinson, manager of the Royal London European Growth fund.

European equity markets have rallied strongly in 2013, delivering a year to date return of over 20% in sterling terms.  The market now trades on a multiple of 1.5 times price to book value, which, although some way from the lows of recent years, is still a discount to its ten year average of 1.7 times book.  Furthermore, it remains at a discount to other developed equity markets.  Indeed Europe’s price to book discount relative to the S&P 500 in the US is still over 40%, much higher than the 20%-25% range that was prevalent pre crisis.  These discounts suggest there is still further head...