European shares look set to sparkle

Shares on the continent have fallen amide the debt crisis but the worst may be over

by Emma Wall
The Sunday Telegraph
Sunday 29 January 2012

Watching the bustling hoards take advantage of the Parisian sales, it hardly smacks of a country on the brink of recession.

Despite losing its AAA credit rating last week, there are at least some sectors of the French economy that are buoyant.

Shoppers toting large bags emblazoned with luxury-goods labels spill out of cafés - one famed patisserie had a queue of these weary consumers stretching around the corner.

Retail and consumer stocks are among the bargains that European fund managers are snapping up.

British investors pulled more than £100bn out of European funds last year, as fears over the eurozone crisis grew.  But now, managers are saying the worst is over, and the price is right and that an opportunity beckons for contrarian investors.  ......

Sceptics should be comforted by the appointment of the new president of the European Central Bank, Mario Draghi, who, within two months of his appointment, has reversed interest-rate rises, encouraged European governments to adopt a fiscal plan and given banks unlimited access to euro and dollar funding.

New Italian president "Super" Mario Monti is also setting the right tone.

"Robin Geffen of Neptune met with Mario Monti recently, who is convinced that Europe will survive and be stronger for this turmoil," said Alan Steel, who runs his own asset management company.
"So Europe funds are probably a decent punt for a few years on the basis they are cheaper than they will be when things look perfect again."  ......

Funds to buy

If you are brave ...
For those who don't mind a bit of volatility, financial adviser Alan Steel recommends Jim Campbell, who runs the JPM European Smaller Companies fund, as the smaller companies sector was hit the hardest and has the most potential for growth.  ......

If you are looking for income ...

Mr Steel tips Invesco Perpetual European High Yield, "run by two of the UK's most experienced bond managers Paul Read and Paul Causer, it carries a yield of well over 8pc right now".

Quotes courtesy of the Sunday Telegraph
Sunday 29 January 2012