Stronger Retail Sales Brighten Eurozone Outlook
When we look at the broader trends in the world economy, the general policy stance in most regions of the world is relatively apparent. Countries like the US are actively reducing stimulus programs while other areas (like Japan) are still pumping money into the economic system as a means for generating growth. But one of the exceptions here is the Eurozone, where it is still unclear whether or not the Eurpoean Central Bank (ECB) will elect to put new easing programs in place or start cutting back further in the underlying cash rate. Economic Data
For these reasons, it will be much more important to start watching economic data releases coming out of the region. This is the best way of gauging where the ECB will be headed next. There are some sections of the economic that will be viewed as more important than others. But already this month, we have seen positive results in retail sales in the Euro area, with particular strength seen in online retail sales figures.
This is a good indication that consumer confidence in the region in rising, and this bodes well for general growth numbers as we head into the latter parts of this year. Of course, results like these will help brighten the outlook for assets like the iShares DAX ETF (DE) and the Guggenheim CurrencyShares Euro Trust (FXE). And, as long as the ECB remains in protective mode, there are much better chances that we will see retailers showing the ability to command better margin scenarios and improve earnings into the third and fourth quarters.
Online Sales are Key Point of Strength
Retail sales numbers that come from the ECB are very broad in nature. Most of the market is now reacting to the fact that retail sales figures in the 18-member Eurozone region were higher for the third straight month for the period ending in March. What is most encouraging here is the underlying bullishness in the online sector, which continues to post strength at rates that are in-line with what is seen in most of the world’s fastest moving economies. Names to watch in this space include AtelierGS, which is a retailer that was established in 1926 and continues to sell fashion items all over Europe. Names like AtelierGS will continue to be used as a precursor for what is likely to be seen in the rest of the sector, so investors of all levels (in both the indices and in individual stocks) should continue to watch how their numbers progress going forward.
Forward Projections for the Region
So far, the retail area has posted some of the best economic strength when we look at the recovery prospects for the Euro area as a whole. There are still some significant questions that will need to be asked in terms of what is likely to guide monetary policy direction at the ECB. But when we look at some of the early results, it is starting to look more and more like the Eurozone is participating in the global recovery and has started to find solid footing after the sovereign debt crisis seen a few years ago. Continue to watch retail sales figures for further direction.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.