A tepid second quarter for Europe

With a full-fledged economic recovery remaining distant, European stocks turned in a mixed performance.

Rouhan Sharma 3 July, 2013 | 5:38AM
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European stock markets had a lacklustre second quarter, turning in a mixed performance. Perhaps the single-most important factor that affected equities worldwide during the period was the fresh dose of monetary easing (and succeeding worries over U.S. monetary tightening) adopted by central banks in the major currency regions: the U.S., Europe and Japan.

The quarter began on a mixed note, as European stock markets initially rose in April after Germany's Parliament approved an international bailout package for Cyprus and as Moody's retained Germany's top sovereign rating, citing its highly competitive economy and investor confidence.

But the markets pared those gains after the European Central Bank projected a gradual economic recovery only in the second half of the year, and subject to downside risks. The International Monetary Fund in April also lowered its projections for economic growth for the eurozone, saying it would shrink 0.3% this year compared with an earlier estimate of -0.2%. Bundesbank President Jens Weidmann cautioned that a complete recovery could take a decade. The markets fell again after Fitch cut the United Kingdom's long-term foreign and local currency issuer default ratings to AA+ from AAA in April, while maintaining its stable outlook.

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Rouhan Sharma

Rouhan Sharma  Rouhan Sharma is an assistant site editor for Morningstar.com based in Mumbai, India.

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