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Europe's periphery back in investment zone

Tuesday, January 29, 2013 - 02:31

Jan. 29 - Money is flowing back into the euro zone's peripheral countries, as investors believe the ECB is behind the market, and their fears about the crisis are easing. Ciara Sutton reports

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Another strike in Portugal - this time metro workers bring the entire underground system to a stand-still. The euro zone's peripheral countries are still struggling almost daily with protests, but a new report suggests the tide is changing. Or at least sentiment is. Dutch bank ING says around 93 billion euros of private investment was pumped into the periphery in the last 3 months of 2012. That's a stark contrast to the previous four years, which saw investors abandoning debt-ridden countries such as Greece and Spain. Senior Economist at ING Martin Van Vliet, says the ECB is behind the market. (SOUNDBITE) (English) MARTIN VAN VLIET , SENIOR ECONOMIST AT ING, SAYING: "In early August the ECB promised to buy an unlimited amount of bonds if necessary and I think the threat of unlimited intervention is mainly behind this reversal in the capital flight so I think we should really thank Mario Draghi." As economic stability returns to the region, the euro is continuing its climb towards 2 year highs. And as fears of a euro zone break seem to have passed, assets in the region are offering more attractive yields. Nick Parsons is Head of Markets Strategy at National Australia Bank. (SOUNDBITE) (English) NICK PARSONS, SAYING: "If the ECB stands ready as it does to activate its OMT program, then I think investors have much less to fear in peripheral Europe than they might have previously. Seems to us that the vast majority of austerity will now be spoken about in the past tense rather than being a threat for the future." But a complete turnaround in sentiment may take some time. The inflows seen at the end of last year are dwarfed by the outflows that have battered the euro zone's poorest countries. (SOUNDBITE) (English) ING, SAYING: "We may see some further improvements in the first two months of this year but obviously sentiment in the financial market can easily deteriorate again, there's obviously still some problems with Cyprus. But let's hope this trend continues and that in one or two years time we can indeed say that this was indeed a turning point in the euro crisis, but for now I think it's still a bit premature to say that." Italy's six-month borrowing costs tumbled to their lowest in nearly three years at a bond auction on Tuesday, as investors continue to snap up its debt. And German consumer sentiment rose for the first time in four months. For now, the lull in the euro zone storm continues.

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Europe's periphery back in investment zone

Tuesday, January 29, 2013 - 02:31