European economic growth for 2016 rose to 1.7%. Inflation is running at 1.8%, which is nearing the ECB’s target of 2% and the jobless rate fell to 9.6%; the lowest figure since May 2009.
This is the first time since 2008 that we’ve seen EU growth prospects tracking near the rate of the US. By any comparison, the economic recovery in G7 countries is still at very low levels and fragile global conditions remain.
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Equity market valuations are stretched, and subdued revenue growth will likely lead to analysts’ EPS targets being reduced by 50% for 2017 to reflect actual current growth rates.
Our Algo Engine triggered a short signal in the iShares Europe ETF back in May at $55.75 and the index collapse by 18% within a few months following. Six months on and the index has recovered back to $52 and whilst we don’t have a new short signal present, we’re still cautious that another near term top is now in place.
