The euro area is turning into more of a help than a hindrance for the world economy.
With data this week predicted to show the 17-nation bloc is growing again after an unprecedented six quarters of crisis-driven contraction, economists from Barclays Plc to JPMorgan Chase & Co. say such stabilization will restore the region as a prop, if not a powerhouse, for international demand and financial markets.
To show investors how to take advantage of the changes, Credit Suisse Group AG analysts last month created an index of 19 European stocks that should outpace the rest of the market if the expansion speeds up. Including Cie de Saint-Gobain SA, Europe’s largest supplier of building materials, and Siemens AG, its biggest engineering company, the index is up about 25 percent this year, compared with about 8 percent for the Euro Stoxx 50 Index.
Even if demand stays soft, the escape from the depths of the debt crisis will be enough to rally financial sentiment worldwide, said Christian Schulz, a senior economist at Berenberg Bank in London. A Bank of America Corp. survey of fund managers last month found just 14 percent citing Europe as the biggest risk, compared with 59 percent in July 2012 and 56 percent who now worry about a hard landing in China.
Political instability also remains a threat. In Italy, ex-Premier Silvio Berlusconi’s PDL party threatened a mass resignation of parliamentary deputies following his Aug. 1 tax-fraud conviction before Berlusconi backed off, saying the government should “continue its work.” A party-payment scandal is buffeting Spanish Prime Minister Mariano Rajoy, and managing the debt burden and bailout program in Greece leaves that nation a flashpoint.