Spanish investors most optimistic over future of Euro

According to a study published on by JP Morgan, large private Spanish investors are the most optimistic in all of Europe about the future of the European Union.

The study, based on 325 surveys, revealed that 92% of the Spanish participants considered that the eurozone will manage to avoid any defaults in payments and that the austerity in spending will finally be rewarded.

After Spain, the other most optimistic countries are Ireland and the UK, with 90% and 85% respectively.

With regard to the opinion of high net worth investors in the eurozone, only 6% feared that a severe global depression would occur.

Also, 45% of the private European investors believe that the European equity is the most undervalued risk asset.

Meanwhile, 24% of the investors see parts of the housing sector as an investment opportunity, followed by equities (11%) and high yield bonds and oil (10%).

El Economista reported that with regard to the sectors that might perform better in 2012, investors consider these to be the technology sector, followed by the banking sector and the mining companies.

The director of strategy at JP Morgan, César Pérez, stated that although “the risk has increased” concerning European politics, they expect the markets to continue operating.

“The arrival of Mario Draghi to the Presidency of the ECB was positive for the markets because it increases the possibility that this central body could act as a last resort buyer,” he added.

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Investor confidence low

Fitch Ratings
Euro crisis will continue in 2012

The eurozone sovereign debt crisis will continue largely unchanged in 2012, according to a survey of investors conducted by Fitch Ratings.

According to the survey 25% think the crisis will get worse, while 24% think it will get better this year. Meanwhile, 48% say the crisis is likely to continue throughout the year.

The report showed a shift in mood with survey respondents seemingly more positive about credit issues across all major fixed-income categories. This is in contrast to Q3 in 2011 when investors expressed negative expectations across the board, relative to the previous quarter.

There was a noticeable change in bank confidence amongst investors with 22% marking the banks’ challenges as their greatest concern. This was down from 49% in Q4 last year when it was ranked above sovereigns for the first time. The change can be attributed to the European Central Bank’s (ECB) three-year maturity longer-term refinancing operation (LTRO) action in December, with a second to follow later this month.

Despite concerns surrounding the eurozone crisis, a record 27% of respondents stated banks as their first investment choice, only beaten by industrial corporates, with 28%.

However, investors also expressed a caveat regarding the banking sector based on the link between the eurozone banking system and its political unity. Half of all respondents said that only a resolution of the eurozone crisis will make banks a good investment again. High profile initiatives – such as increased capital, clarity on resolution legislation and imposing limits on assets for debt collateralisation – are not in themselves enough to restore banks’ credit standing.

A further 36% said a eurozone crisis resolution and the other specific measures would all be necessary.

Only 10% of investors surveyed believed that increased capital would restore banks’ credit status and attractiveness to fixed-income investors. Even fewer – just 3% – said clarity on resolution legislation, including bail-ins and depositor preference, would suffice.

While the ECB’s LTROs boosted banks, benefits to sovereigns are viewed as uncertain, 37% of respondents said the ECB liquidity action in December was “the big bazooka”, reducing the risk of eurozone sovereigns facing liquidity crises. However, 54% said there would only be limited take-up by banks for the purpose of buying sovereign debt.

Meanwhile, investors remain troubled by the fragile economic outlook, rating the risk of a double-dip recession high and inflation risk at the lowest since the end of 2010. This cautious stance is also evident in views on corporate growth investment, which have continued their downward trend since mid-2011.

Full report is available at Fitch Ratings

Pessimistic Spaniards

According to a new study, Spain is amongst the 10 most pessimistic countries in the world.

The study, carried out by Nielsen Global Consumer Confidence Index, gauged how people were feeling during the last quarter of 2011.

The report showed that 92% of Spaniards considered the country to be in recession while 70% believed the recession would not end this year.

Although pessimistic, Spain only scored 55, well below the European average. Confidence fell in 24 of the 27 European countries. Only ten countries worldwide scored above 100.

Across Europe the number of people feeling that their financial situation would get worse over the coming months continued to increase.

The report also showed that an increasing number of people are changing their spending habits trying to make savings across the board.

“Overall, consumer discretionary spending will remain restrained and cautious in the first half of 2012,” said Dr. Venkatesh Bala, Chief Economist at The Cambridge Group, a part of Nielsen.

Spain was less pessimistic than Greece, no surprise there, who scored 41 and Portugal who scored 36, which Nielsen described as “alarming”. Why Portugal is more pessimistic than Greece is not clear.

Employment prospects don’t look good with 88% of those interviewed thinking their job prospects for 2012 were not good.