RCM says European stocks should avoid U.S. slowdown
mercoledì, 25 aprile 2007 10.47
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By Sophie Hares
LONDON (Reuters) - European equity markets look robust and should remain relatively immune from any economic slowdown in the United States, RCM's European chief investment officer said on Tuesday.

Valuations are reasonable as European markets hover around six-year highs and there are few signs, despite the recent run of hefty mergers and acquisitions, that companies are paying over the odds to get deals through.

"We actually feel valuations, corporate restructuring, share buybacks, dividend growth is continuing to surprise on the upside," said Neil Dwane, who directly manages 5 billion euros (3.4 billion pounds) in pan-European equities at RCM, which is part of German insurer Allianz (ALVG.DE: Quotazione, Profilo).

"In terms of Europe being a microcosm, we think European equities look pretty good value. We still feel quite happy with equity markets up here," he told Reuters.

The FTSEurofirst 300 <.FTEU3> rose around 16 percent last year, boosted by M&A activity, and is still up around 5 percent so far this year, despite a global equity selloff in late February and early March.

Europe and Asia should remain relatively safe from any major U.S. economic fallout, although exporting industries would be among those to take a short-term knock, said Dwane.

"We think Asia and Europe could continue to go on in a fairly constructive fashion, even if the U.S. does slow down quite substantially," said Dwane, noting the strength of the domestic European economy.

"We're still very healthy on the market and think there's still opportunities to make money."

While concerns about the outlook for U.S. housing and consumption continue to linger, the threat of higher inflation remains a real concern, particularly as crude oil edges towards $68 a barrel.

On a sectoral basis, Dwane said he remains upbeat about European oil, mining, industrial and healthcare stocks.

However, he is swerving away from consumer discretionary, auto, insurance and financial stocks, despite Barclays (BARC.L: Quotazione, Profilo) agreeing to buy ABN AMRO (AAH.AS: Quotazione, Profilo) this week for 67 billion euros, the world's biggest banking takeover.