Europe’s economic recovery remains on track with the upswing continuing to broaden across countries and sectors. European equity markets have returned over 20 per cent this year in US dollar terms but only half of that in euro terms, with the index languishing just below May’s peak in local currency.
The rapid appreciation of the euro has weighed on sentiment, and the equity index, raising concerns that a strong domestic currency could dampen the macroeconomic momentum. We believe these concerns are overdone. The strength of the euro predominantly reflects a more robust euro area recovery than currency markets expected at the start of the year.
Indeed, consensus forecasts for euro-zone GDP have risen significantly since January, from 1.4 per cent to 2.1 per cent currently. A loss of confidence in the strength of the Fed’s hiking cycle appears to have also manifested in further upwards pressure on the euro versus US dollar. When analysing the effect of a stronger euro on corporate profitability, it is most relevant to consider the effective (or trade-weighted) euro; where price appreciation has been far less material and equates to only a few percentage points headwind to profitability.
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Read more:
51 large eurozone banks are exposed to changes in interest rates, ECB says
US dollar outlook takes a positive turn
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We continue to experience a cyclical recovery in Europe and believe the evidence is growing that structural change is also afoot. As such, share price weakness driven by currency strength, and recent geopolitical friction, are an opportunity for investors to buy into the region’s recovery.
Within the euro zone, we now advocate exposure to the French CAC 40 index, having previously favoured German equites (DAX and MDAX indices). The German equity market is Europe’s most global (with around 23 per cent of revenues generated on home soil) and the weakness of the euro in recent years boosted companies export performance. The DAX is also highly concentrated (the largest five firms make up over 40 per cent of the index’s market cap.) Assisted by effective labour market reforms, Germany’s earnings have advanced significantly over the past five years, despite economic turbulence on the continent.
However, now that Europe’s economic recovery is accelerating and broadening out, we believe investors will be better rewarded for shifting exposure to France where we see the potential for greater earnings upside over the next 12 months, and optionality over reforms at the French and European level.
The earnings of the French CAC 40 index stand 20 per cent below where they were in 2007. This contrasts with Germany’s DAX index where significant earnings growth leaves the index’s earnings-per-share 45 per cent above pre-crisis peak. We see catch-up potential, with domestic activity accelerating in France. The French equity index has an attractive sector and geographic mix which fits with our view that both the European and the world economy will perform well into next year.
In terms of geographical exposure, the CAC 40 index is more domestic and should therefore be more insulated if the euro were to remain strong. Looking at sector weightings, the CAC 40 is biased towards banks (beneficiaries of a strong domestic economy) and industrials. Trading in-line with the broader European index on a price to earnings multiple, the French large cap index can enjoy modest multiple expansion if the earnings acceleration comes through, as we anticipate.
While we believe in global reflation, the path to monetary normalisation will be slow and steady in Europe leaving investors still searching for income. A further attraction of the investing in the French index lies in its dividend, with a 3.2 per cent yield growing in excess of 7 per cent per annum compounded annually, according to current analyst forecasts.
Finally, the French equity risk premium could benefit from structural reform. The election of the president Emmanuel Macron in May of this year raised hopes that France will increase its focus on fixing a chronic lack of competitiveness and high level of unemployment by implementing reforms.
These hopes have faded recently, yet we remain optimistic that this government will steer the country in the right direction. We are not expecting game-changing reforms but we believe that any progress will be incrementally positive for sentiment and could lead to renewed investor interest and inflows. In addition, now that the German chancellor Angela Merkel has been re-elected, we also expect to see the potential for a stronger Franco-German partnership leading to reforms at the European level.
Grace Peters is the executive director and European equities strategist at JP Morgan Private Bank
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
If you go
The flights
There are direct flights from Dubai to Sofia with FlyDubai (www.flydubai.com) and Wizz Air (www.wizzair.com), from Dh1,164 and Dh822 return including taxes, respectively.
The trip
Plovdiv is 150km from Sofia, with an hourly bus service taking around 2 hours and costing $16 (Dh58). The Rhodopes can be reached from Sofia in between 2-4hours.
The trip was organised by Bulguides (www.bulguides.com), which organises guided trips throughout Bulgaria. Guiding, accommodation, food and transfers from Plovdiv to the mountains and back costs around 170 USD for a four-day, three-night trip.
Married Malala
Malala Yousafzai is enjoying married life, her father said.
The 24-year-old married Pakistan cricket executive Asser Malik last year in a small ceremony in the UK.
Ziauddin Yousafzai told The National his daughter was ‘very happy’ with her husband.
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
The biog
Birthday: February 22, 1956
Born: Madahha near Chittagong, Bangladesh
Arrived in UAE: 1978
Exercise: At least one hour a day on the Corniche, from 5.30-6am and 7pm to 8pm.
Favourite place in Abu Dhabi? “Everywhere. Wherever you go, you can relax.”
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%3Cp%3E%3Cstrong%3ECreator%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Ramez%20Galal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStreaming%20on%3A%20%3C%2Fstrong%3EMBC%20Shahid%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E2.5%2F5%3C%2Fp%3E%0A
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich v Real Madrid
When: April 25, 10.45pm kick-off (UAE)
Where: Allianz Arena, Munich
Live: BeIN Sports HD
Second leg: May 1, Santiago Bernabeu, Madrid
Challenge Cup result:
1. UAE 3 faults
2. Ireland 9 faults
3. Brazil 11 faults
4. Spain 15 faults
5. Great Britain 17 faults
6. New Zealand 20 faults
7. Italy 26 faults
