Macro Research Europe: A gloomy outlook as the Russia-Ukrai | FSMOne SG - Research Highlights

Macro Research

Europe: A gloomy outlook as the Russia-Ukraine war weighs on growth

• The impact of the Russia-Ukraine war is the most apparent on the European economy, especially due to its energy dependence on Russia.

• With the supply-side damage to key resources including energy, agriculture, and metals, coupled with Europe’s relatively larger exposure to Russia and Ukraine, inflationary pressures have become worse than expected and production in Europe has seen cuts.

• As such, GDP and earnings growth have been cut. Moreover, from a bottom-up perspective, German automobiles (the largest industry in the largest EU economy) have also warned of such headwinds ahead.

• Not only has the growth outlook turned gloomy, monetary policies have also turned less accommodative with rate hikes likely beginning from July, which is much earlier than the original kick-off in 2023.

• We downgrade GDP and earnings growth, but given the sell-off of the STOXX Europe 600, based on 2024 EPS, the target price is EUR 502, which implies a reasonable upside potential of 24.7% as of 16 June 2022.

• Hence, we maintain our 3.0 stars “Attractive” rating on European equities, but caution investors of the downside risks, and recommend investors to position themselves in the other more attractive markets/sectors.

: Read the full article here
: Allianz Europe Equity Growth Select Cl AT Acc EUR/ Threadneedle (Lux) Pan European Small Cap Opportunities AE Acc EUR / Vanguard FTSE Europe Index Fund ETF Shares