European Markets Improve

European Markets Improve

European stocks performed well on Friday and set their sights on 7-year highs, as the eurozone economy showed signs of strength and Greece moved closer to a deal with its creditors.

European Markets Improve
European Markets Improve

Friday data indicated the eurozone economy expanded more than expected during the fourth quarter of 2014 on the strength of robust German growth.

The Stoxx Europe 600 gained 0.4% on Friday and reached its highest mark since 2007. The German DAX hit its highest level ever, topping the 11,000 mark.

“We expect the positive underlying momentum in the economies to continue. Lower oil prices mean higher purchasing power for consumers and the lower euro will improve sentiment and gradually start to make its way through to growth too,” Evelyn Herrmann, European economist at BNP Paribas, told The Wall Street Journal.

The European Central Bank also plans to begin a quantitative easing program in March which is expected to weaken the euro and attract foreign investors to European stocks. Goldman Sachs forecast the Stoxx Europe 600 to advance by 8% in the next 12 months, as opposed to 4%.

Eurozone, Greece work to reach agreement
Greek Prime Minister Alexis Tsipras has expressed that he has no intention of abiding by the current bailout program, according to Bloomberg. In addition, Greece is on the brink of bankruptcy – a prospect that could endanger economic growth throughout the euro region.

Having said that, Tsipras and European Union officials are working on a new aid program. Analysts are confident the two groups will reach an agreement, even if it is a last minute deal.

“The crisis in Greece remains a risk, though so far contagion has been very limited and we expect it to eventually reach a deal,” Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam, told Bloomberg. “The euro zone is likely to continue to surprise positively in 2015.”

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