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9/4/2019 0 Comments

Europe showing signs of unity

A good day in the markets on the back of positive service numbers out of Europe and more signs that Brexit will be delayed.

The defection of MPs from British prime minister Boris Johnson is causing relief in European equities because of the prospects of a Brexit delay coming as a result. Johnson wants to leave the union at the end of October "come what may" which has seen the Pound and British equities drop over the past month. 

The Services numbers coming out of mainland Europe were optimistic (with exception to Italy) which will not likely stop the cutting of the rates and easing by the ECB, but could support a more measured approach over time. The real success of the stimulus program will come from the Eurozone members ability to coordinate fiscal with monetary stimulus. In the past this has been difficult with core countries like France and Germany resisting deficits to boost spending. With Germany suffering from a the slump in trade and France having a government with a pro integration leader, there is opportunity to avoid a downturn.

From an investment standpoint this is good news for long term buyers that there is more potential coordination than we have seen in the past slowdown. The fact that there will still be cuts, and the majority of the heavy lifting done by the ECB in the interim, it might be a bit early to look at certain stocks like the banks (see last post). Buying into any dip will not be as risky so long as the countries of in the Eurozone (notable Germany) start to warm towards fiscal stimulus and work together. 
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