How to position for renewed eurozone growth


Most of the clients we have met recently are still bearish on the euro growth outlook. They may be in for a surprise in the coming weeks and months, if as we expect, the flow of macroeconomic hard data continues to improve. In our view, expectations may have been overly influenced by the weakness of the Purchasing Manager Index (PMI) surveys, as well as the German industrial sector. The persistent negative sentiment on Europe and the euro area can be explained by disappointing PMIs and background risks such as Brexit and escalating trade tensions with the US.

Yet, Societe Generale economists consider that growth is back in the euro are. Hard data have proven solid in the first quarter of 2019 and the fundamental analysis (more accommodative budgetary policies compared with last year, a weaker EUR, lower inflation, high profit margins, and resilient labour markets) suggests growth should hover around 0.4% over the rest of the year, leading them to revise up their GDP growth forecast to 1.4% this year (Consensus 1.1%). With inflation failing to rise much versus the central bank target, they however consider that any positive data will only support the European Central Bank (ECB) baseline scenario and thus reduce the need for dovish measures. The current forward guidance of the ECB is not likely to change before the autumn and the odds remain for further postponing of interest rates normalisation.

In their latest research on topic, set out in the Cross Asset Special Report “How to Position for Renewed Eurozone Growth” and Latest on Our Minds report “Growth is Back in the Euro Area”, the bank’s strategists and economists take a look at FX, bond, equity and credit markets and give a series of recommendations so as to best benefit from the forecasted rebound.



Societe Generale Cross-Asset Research is composed of more than 200 Analysts, Strategists, Economists and Quant, combining their expertise into ‘Research-based’ and innovative solutions suited to client’ needs: fundamental studies and expert views, investment ideas and long-term strategies, trade ideas and tactical baskets, thematic and systematic indices, quant solutions. On top of its established UK and Western European base, Societe Generale Cross-Asset Research benefits from a global coverage thanks to its presence in the US and in Asia (Hong Kong, Singapore, Tokyo and Bangalore) and Societe Generale local networks in Eastern Europe.


This editorial contains financial analysis which reflects the opinion of the Cross-Asset Research department of Societe Generale at the date of its publication. It does not necessarily reflect the views of the other departments of Societe Generale nor the official opinion of Societe Generale. This interview is dedicated to institutional and professional investors and is not deemed to be seen and used by retail investors for investment purpose. The viewers shall consult their own financial advisers to make their own appraisal.