1. European economy remains in good shape
European macroeconomic data points have proven remarkably resilient during the past twelve months, despite numerous political events, such as the Brexit referendum and the Italian constitutional referendum. Eurozone gross domestic product (GDP), supported by domestic consumption, is now pointing in the right direction, while employment rate continues to recover due to improved business sentiment. The monetary transmission mechanism seems to be working again with improving lending conditions and lending rates. With the highest reading since April 2011, the latest Markit manufacturing purchasing managers index (PMI) for the Eurozone yet again confirmed that the recovery is intact.
2. Global economy improving
Global macroeconomic is important for Europe because economic growth abroad can translate into positive stimulus via the strong export links of many European companies. The outlook for global economy has become more supportive and economic growth is expected to accelerate, albeit mildly, across developed and emerging market (EM) economies. The worst of the emerging market seem to be behind them and at the same time, the ever important US economy continues to do well and might even receive further stimulus from President Trump. Moreover, some battered areas such as the oil sector might see an improvement in investment spendings on the back of gradual recovery of oil price.