Which European sectors offer the best prospects?

Europe is benefitting from a valuation discount to the US in terms of P/E and dividend yield, as well as an improving outlook overall.

Although growth is not robust and risks remain, Europe's quantitative easing programme is gaining traction. Earnings growth can far outpace economic growth as operating leverage kicks in.  For example, industrial companies, which restructured later and more slowly than their US counterparts, can use export growth to lift operating margins. Companies can benefit from the combination of improved operating leverage after aggressively rationalising operations, and a stronger economic environment. Investors should, and will, shift from a defensive posture toward the opportunities of growin...