Growth in Europe justifies ECB's action

In today’s Finance Show, we discuss the ECB action, the opportunity in European peripheral banks, and the firming US rate hike expectations, with Ben Gutteridge, Head of Fund Research at Brewin Dolpin.

ECB didn’t stay tall to market expectations

Gutteridge starts by commenting on the ECB rate decision and the further easing plan of the ECB. He believes that while cynics would argue a German hand curtailing the ECB from acting aggressively, the real reason remains the improving growth outlook in the Eurozone. With European growth moving towards the 2% trend, more aggressive stimulus by Draghi wouldn’t be appropriate.

ECB has very successfully made the peripheral banking lending rates relate with the core countries, says Gutteridge. He adds that through liquidity measures adopted by Draghi, the peripheral eurozone corporate can lend at more favourable rates, closer to the rates enjoyed by Germany. In an environment where labour is cheap, all of this bodes positive for Europe, believes Gutteridge.

Investment opportunity in peripheral eurozone economies?

Gutteridge notes that there remains opportunity to make money in eurozone peripheral banks. The ECB policy encourages lending, and consolidation ahead in the industry should drive earnings in the future.

Over-reaction to ECB

Gutteridge believes that we have seen an over-reaction the ECB decision, as the central bank had prepared everyone for quite a big policy move. But, the reaction by short-term traders have opened up opportunity for the long-term traders.

US jobs data ahead: Fed can’t be any more dovish

Speaking on the US jobs data ahead, Gutteridge believes that the event remains a little more significant than previous releases. With the fed rate hike coming, Gutteridge believes that the Fed can’t be more dovish than it has been in the past.

Even though the dollar is weak, Gutteridge remains on the pro-dollar wagon.