Equities in America are still looking more attractive to investors - as the Euro-zone appears to be flirting with recession.
Latest economic data should point investors towards American, rather than European, stocks, JPMorgan said today.
The investment bank's latest market analysis supports the economic data released by the European Commission last Friday, which stated that the Euro-zone is likely to come close to recession over months to come. This means that the economies of the 15 states which have the Euro as their currency could experience two consecutive three-month periods where their economies contract, rather than expand.
Indeed, JPMorgan's own analysis suggests that economic growth in the area will only reach 0.5 percent as a best-case scenario over the rest of 2008. While the US economy - and its stock markets - has also been hit by the current economic downturn, evidence shows that it is performing rather better.
For example, while the Euro Stoxx index has declined in value by 24 percent since the beginning of the year, the corresponding drop in America's S&P 500 stands at just eleven percent.
"So far macro [ie, pertaining to the economy as a whole] momentum still very much favours the US," JPMorgan said in its report. "It is tempting to take a contrarian view and look for better than expected European data going forward. However, we still see analyst expectations being revised down."
Therefore, the investment bank added, European stocks do not yet look "sufficiently compelling" and the region as a whole "still carrries considerable earnings risk" - meaning that US stocks remain a better bet.
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