CHICAGO (Reuters) – Buried in a recent avalanche of anxiety over the Federal Reserve and U.S. bond and stock selloffs was continuing good news about European growth.
With euro zone growth expected to return in the second half of this year, buying opportunities abound after the recent global stock retreat, according to Standard & Poor’s Capital IQ analyst Robert Quinn. He expects “fragile growth” by the end of this year as businesses start spending again.
The Continent is still a long way from safe-harbor territory, but its recovery may be on course. A reliable growth gauge known as the Markit’s Flash Euro Zone Composite Purchasing Managers’ Index rose this month to its highest level since March 2012, topping forecasts. In addition, the United States and the European Union on Monday began talks on a free-trade agreement that could boost American and E.U. gross domestic product by $100 billion annually.
If approved, the free-trade agreement would boost sales and profits of European companies. The two trading partners transacted nearly $650 billion in business last year alone.
Even a meager European recovery is positive news for investors. Unlike the Federal Reserve’s recent announcement that it could begin winding down its bond-buying program as early as the end of this year, European Central Bank President Mario Draghi said on June 26 that the ECB’s easing program exit is “distant.” That policy may provide an underpinning for European growth.