Investors are taking profits on European equities due to concerns about the impact of ‘hot money' flows, poor earnings growth, and the strength of the euro.
Europe has rallied over the past year, with a 23% gain from the MSCI Europe in the year to 9 July, compared with three-year growth of just 5%. The average fund in the IMA Europe ex-UK sector has returned 10%. However, while predictions at the start of the year for earnings growth were as high as 14%, there have since been continual downgrades in expectations. The European market has been supported by a flow of money from overseas investors, particularly from the US. But as the US economic recovery gains momentum, there is speculation investors will now return to their domestic base. ...
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