Strong fundamentals support European equities in 2007

Presenting to IFAs at the sixth annual Joint Investment Forum, Roger Guy highlighted the reasons why he and Guillaume Rambourg, co-managers of the Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund, believe European equities have the potential to perform well in 2007.

Speaking at Merchant Taylors' Hall in London, Roger stressed a number of positive factors that support the case for investment in Europe this year. “The momentum behind Europe’s economic recovery continues to build, with Germany playing a leading role. Inflation remains under the ECB’s target rate and the risk of resurgence appears low. This background should support further upgrades to company earnings, and the fact that corporate cashflows remain strong should continue to encourage the high volume of merger and acquisition activity that drove markets higher last year.

“Companies that benefited from this trend last year continue to look attractive in 2007. These include Arcelor, which merged with Mittal in a watershed hostile takeover deal to create the world’s largest steel company. We’ve recently added to our investment in Arcelor Mittal as we believe the stock still has the potential to perform well. The company has been making good investment decisions such as the recent purchase of a plant owned by Grupo Villacero, making it Mexico's biggest steel producer.

“Considering how compelling all of these arguments are, European equities remain very attractively valued, particularly when compared to US stocks. We therefore remain positive about the outlook for European equities in 2007.”