European stocks rallied this morning on the back of better-than-expected data coming out of the Spanish banking sector. The data suggested the situation in the debt ridden country may not be as critical as originally thought, although there is still much concern over the long term stability of the nation. Economic data coming out of Asia showing yet more slowing in growth was almost ignored as investors sprung into life, breaking all convention as they pushed forward with their business.
The data was released by Oliver Wyman, who conducted the stress test on the behalf of Spanish officials who wanted to know the scale of the problems they faced. Estimates earlier this year had put the capital deficit at around €62 billion, however the tests revealed that the deficit is in fact €59.3 billion. While the difference may not seem impressive, investors have been clinging to any and all positive news they can of late.
Europe not out of it yet
Despite the positive news coming from Spain, Europe is far from pulling itself out of its current slump. While the news from spain was better-than-expected, unemployment met its disappointingly low expectations as it remained stagnant at 11.4%. The figures for unemployment which are released from Luxembourg every month by the Statistics Office have not moved since May, with the previous two months data being adjusted.
This information has slashed forecasts for earnings in the region, with predictions falling by more than half. This has left forecasts for net income at around 12.5%, down from 26% at the beginning of the year. Regardless of all this turbulence taking place in the background, the Euro Stoxx 50 is currently sitting at 1000% of next years expected profit on the index.