Europe

January 2012

European politicians disappoint once again.
The European Central Bank acts to ease the strains in the financial system.
German business confidence rises unexpectedly.

It was another bumpy – but ultimately positive – month for European equities. As ever, the sovereign-debt crisis dominated proceedings. On 9 December, European Union leaders met for yet another grand summit aimed at saving the euro. And, as at previous gatherings, the outcome failed to inspire. The need for action couldn’t have been more pressing. Standard & Poor’s has put 15 nations on watch, including Germany – Europe’s powerhouse – and France.

True, some progress was made. A new fiscal accord was agreed, with 26 countries – the UK exercised its veto – agreeing to harmonize fiscal policies by capping government debt and deficits. These rules, however, seem designed to avert future crises – they do little to address the current one. It is also unclear how they will be enforced. Markets soon made their feelings known: yields on ten-year Italian debt climbed above 7% (a level deemed unsustainable) and equity markets tumbled.

But as the festive period approached, the European Central Bank intervened to ease the strains in the financial system. In an unprecedented move, it provided some half a trillion euros in ultra-cheap three-year loans to 523 of the region’s struggling banks. The take-up was stronger than expected, and it is hoped banks will use the funds to buy higher-yielding government bonds. All eyes then turned to Italy’s €9 billion auction of six-month debt. While that auction was seen as a success, a later sale of three- to ten-year debt was undersubscribed, highlighting the challenges that still face the eurozone’s third-largest economy.

It was a mixed bag on the economic front. German unemployment remains at a record low and the Munich-based Ifo institute's measure of business confidence unexpectedly rose in December. But data showed that manufacturing output across the wider eurozone fell for a fifth consecutive month, although the rate of decline did slow.

A month of highs and lows, then, that saw the FTSE Europe ex-UK index returning 1.1% in local-currency terms.

The information contained in this document has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact. Investment markets can change rapidly and the views expressed should not be taken as statements of fact, nor relied upon when making investment decisions.

Find out more about SWIP's key funds

This section of the site is for professional use only and must not be accessed by retail investors.

AcceptDecline

Important Information for Professional Advisers.

Please read this page before proceeding, as it explains certain restrictions imposed by law on the distribution of this information and the countries in which our funds are authorised for sale. It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction.

This does not constitute an offer or solicitation to sell shares in any of the funds referred to on this site, by anyone in any jurisdiction in which such offer, solicitation or distribution would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.

Applications to invest in any fund referred to on this site, must only be made on the basis of the offer document relating to the specific investment (e.g. prospectus, simplified prospectus or other applicable terms and conditions).

As a result of money laundering regulations, additional documentation for identification purposes may be required when you make your investment. Details are contained in the relevant Prospectus or other constitutional document.

If you are unsure about the meaning of any information provided please consult your financial or other professional adviser.

You may leave the Scottish Widows Investment Partnership Limited (SWIP) website when you access certain links on this website. In so doing, you may be proceeding to the site of an organisation that is not regulated under the UK Financial Services and Markets Act 2000. SWIP has not examined any of these websites and does not assume any responsibility for the contents of such websites nor the services, products or items offered through such websites.

SWIP shall have no liability for any data transmission errors such as data loss or damage or alteration of any kind, including, but not limited to, any direct, indirect or consequential damage, arising out of the use of the services provided herein.

On accessing the SWIP website, you are aware of the following investment risks applicable to all SWIP funds:

Past performance is no guarantee of future performance.
The value of investments and the income from them may go down as well as up and are not guaranteed.
Your client may not get back the amount they invested.
Taxation rules and legislation may change without notice.
Rates of exchange may cause the value of investments to go up or down.
Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially.
For your protection, telephone calls are usually recorded.

This site is operated and issued by Scottish Widows Investment Partnership Limited, Company No. 794936. Registered Office in the United Kingdom at 33 Old Broad Street, London EC2N 1HZ. Tel: 0131 655 8500. Scottish Widows Investment Partnership Limited is authorised and regulated by the Financial Services Authority and is entered on their register under number 193707 (www.fsa.gov.uk).