Eurozone GDP: Reactions From the Market

The eurozone economy grew at its fastest pace in almost two years in the first quarter of 2015, and although policy makers have openly expressed worries that the recovery may not be sustained, economists and strategists appear cautiously optimistic.

Here’s a quick round-up of initial reactions from the Street.

Luigi Speranza, economist at BNP Paribas

"Overall, while slightly below our forecasts, the eurozone GDP figure for Q1 was encouraging.

"With plenty of scope for exports and investment to accelerate from current levels, we continue to expect growth of around 0.5% quarter-on-quarter in Q2, despite some possible slowdown in consumption, as oil prices have come back up from their lows."

Azad Zangana, European economist at Schroders

"Overall I think this is a very strong set of numbers, even though some of the individual country reports were still mixed.

"I think that it will certainly support the case for stocks and help corporate earnings. As this happens, the quite lofty valuations that we’re seeing in equities will start to look more justified."

Luca Paolini, chief strategist at Pictet Asset Management

"We are still bullish on Europe. We have seen a big outperformance of the European economy relative to the U.S. That gap is probably going to close in the coming months, but the key is how the economic momentum translates into earnings.

"Much lower margins in Europe, as well as lower earnings, means there’s more upside."

Richard de Meo, managing director at Foenix Partners

"This morning’s GDP figures are a pointed reminder that Europe has been quietly going about the business of repairing its broken economy, with growth across the bloc higher than both the U.K. and U.S. in the first quarter of this year, despite the 0.4% print falling just short of forecasts.

"Dramatic euro losses against the dollar and months of bad press linked to the ECB’s quantitative easing program and Greece’s debt saga have caused investors to overlook a definite upturn in the region’s underlying economy.

"There continue to be mixed fortunes across the bloc with diverging paths for its largest contributors, yet the overall message is one of optimism and suggest the euro’s recent rough ride has been somewhat undeserved."

Kevin Gardiner, managing director at Rothschild Wealth Management

"The data are encouraging – especially because they are unlikely to have been materially affected by the euro’s sharp fall (which would usually take a couple of quarters to have an impact) or by QE (which didn’t get going until March, and which in any case can’t easily have such a direct impact).

"My guess is that cheaper oil and a reduced headwind from fiscal austerity helped. Prospects for the second quarter are enhanced by the prospect of stronger U.S. import demand after the Q1 soft patch there, and by that lagged competitiveness effect. That said, I doubt that the euro will continue to outpace the U.S. from here."

Timo del Carpio, European economist at RBC Capital Markets

"From a policy perspective, we think today’s out-turn, while encouraging, is unlikely to rock the boat. On our forecasts we still expect real GDP in the euro area to remain below its pre-peak by the tail end of 2015, and both the ECB and European Commission remain relatively cautious on their recently revised projections as well.

"Indeed, with domestically generated inflationary pressures still anemic, and with structural headwinds still in force across the region, we continue to argue that the ECB has plenty of cause to keep its aggressively loose monetary policy stance in place for some time to come."

- Tommy Stubbington contributed to this post