Companies in Europe are boosting spending on plants, computers and equipment for the first time in four years, a sign to investors that stocks will overcome the region’s sovereign debt crisis as economic growth builds.
Investors should not live in hope that fresh Federal Reserve stimulus efforts will underpin stock prices because the U.S. central bank has lost the clout to offset a slowdown, according to UniCredit SpA .
When European equity strategists at the world’s largest investment banks forecast a rally in 2011, UniCredit SpA’s Tammo Greetfeld said they were wrong. He was vindicated as stocks tumbled the most in three years.
Most European stocks fell amid renewed concern that the region’s debt crisis may worsen and as the Federal Reserve said the U.S. economic recovery is not strong enough to scale back its stimulus measures.
European stocks dropped to a one- month low, led by a selloff in construction and basic-resources companies, after U.S. housing data added to evidence that growth in the world’s largest economy is slowing.
German stocks fell as optimism that the 85 billion-euro ($111.3 billion) aid package for Ireland will stem Europe’s sovereign-debt crisis withered and investors demanded higher returns at Italian and Belgian bond auctions.