Summary
Highlights
Optimism around fiscal spending plans in Germany and in Europe has boosted the region’s stocks.
If implemented well to boost productivity and improve efficiencies across Europe, the plans may be positive for long-term growth.
Overall, short-term volatility could rise amid new tariffs in particular on the auto sector.
In this edition
German equities, and more broadly European indices, have outperformed the main global benchmarks so far this year on the back of changing attitudes towards fiscal austerity in the region. The reform of the ‘constitutional debt brake’ in Germany is paving way for hundred of billions of euros worth of spending on defence and infrastructure. In addition, the European commission has proposed to give additional room to EU countries to spend more on defence and also gave suggestions for joint debt for this purpose. While markets have rightly welcomed this, the most important factors are how these proposals/plans are implemented to improve productivity so that the benefits percolate down to the real economy.

Key dates
1 Apr EZ CPI, US ISM, Australia policy rate | 3 Apr EZ PMI, China PMI | 4 Apr US labour markets, India PMI |
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