Europe Equities 3Q19: Brexit and beyond


At this rate, the EU’s largest economy could have to brace itself for a prolonged slowdown
Chief Investment Office10 Jul 2019
Photo credit: AFP Photo


Growth in the EU stagnated on the back of the sharp drop in Germany’s ZEW current economic sentiment reading. The manufacturing sector – among the main driving forces of the country’s economy and corporate wellbeing – continued to face a downward trend. At this rate, the EU’s largest economy could have to brace itself for a prolonged slowdown, just as it is facing Chancellor Angela Merkel’s retirement in 2021.

Not so invincible. The free cash flow yield among German corporates has worsened to 1.4% in 2Q19, the lowest level since 3Q13, extending the struggle and widening the gap with other regions. The next-to-zero yields of German Bunds further pushed the ECB into a policy bind, with little margin to negotiate new monetary easing.

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