Europe: Things can only get better

There is scope for European assets to catch up

Sentiment remains depressed, with European ETF flows posting the greatest outflows in two years and the BofA FMS survey registering the biggest underweight for European stocks vs the US since 2001. The pessimism suggests the bar to beat expectations is relatively low; and should downside risks fail to materialize (such as no or only moderate US import tariffs and a ceasefire in Ukraine), there is scope for European assets to catch up.