We are upgrading our stance on European equities to Market Weight from Underweight as several key developments appear to be afoot on the continent.

Two events in particular mark a departure from the status quo. First, the EU’s joint response proposal to lend a hand to those countries most affected by the COVID-19 crisis suggests a step towards greater fiscal union. Second, Germany has shed its parsimonious past and is embracing fiscal spending. What’s more, both of these are happening amid a backdrop of very accommodative monetary policy from the European Central Bank (ECB).

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