Eurozone still heading in the right direction

The macroeconomic backdrop at the turn of the year confirms the relative strength of the euro zone compared to other regions. Although manufacturing PMIs are losing some momentum, they continue to point to further expansion. The services PMIs, too, are holding up quite well in the euro zone.

However, the ongoing recovery is being put to the test by various political risks. Beyond the intensifying refugee crisis, the visibility on the political situation in the European Union is particularly blurred at the beginning of this year (elections in Spain and Portugal, the Italian bad bank, Greek discussions on its reform agenda, Brexit, etc.).

Taken one by one, these are manageable risks rather than systemic risks capable of derailing the current recovery. We will continue to monitor these uncertainties carefully in the coming weeks and have become more cautious on the European periphery.

In previous years, markets have been “saved” by ECB interventions. Today, the ability of central banks to act decisively is being questioned by investors. It has to be seen how the ECB will address the state of its monetary policy transmission through the banking sector in the Eurozone at its next meeting on March 10th...

Read the complete Asset Allocation Outlook for this month