Europe - quarter 2 commentary from AEGON Asset Management
European stocks fell by almost 5% in sterling terms during the second quarter as dismal double-digit declines in June reversed a two-month rally that began in March, following the Federal Reserve-led bailout of Bear Stearns. Crude oil prices climbed to a record of over $145 a barrel, completing its biggest quarterly increase in nine years. This stoked speculation that borrowing costs would have to rise to contain inflationary expectations. Central bank rhetoric duly turned more hawkish. Investor concerns that stagflation was again becoming a possibility re-emerged as economic activity data continued to deteriorate. Financials and consumer facing sectors fared worst. Banks, insurance, autos and retailers all posted relatively large falls. The standout winners were easily to be found in the oil & gas and basic materials super-sectors. The peripheral “tiger” markets in Ireland, Greece and Spain performed very poorly.
