European earnings revisions turning positive
Source: Fidelity, Datastream, Morgan Stanley , data as of 6 Apr 2017. N12M ERR (%) = 12-month earnings revision ratio. 3MA = 3-month moving average.
What we are now seeing is a strong recovery in European stocks, with earnings starting to come through. Margins are recovering and the most recent earnings season in Europe has been the strongest in more than 10 years.
Particularly compelling for European equities is their valuation. As they have been out of favour for much of last year they are trading at a multi-year discount relative to the US on a price-to-book basis. And today, record high numbers of European companies have a dividend yield that exceeds their bond yield.
Source: Datastream, GS Research, data as of 31 March 2017.
Percentage of stocks with dividend yield > bond yield
Source: Datastream, Goldman Sachs Global ECS Research, December 2016. Stoxx Europe 600.
Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets.
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