JPMorgan said that looking ahead, European stocks should continue to be supported given the significant improvement in COVID-19 vaccination, the upcoming financial support measures and the sharp discount rate of European stock markets relative to the US stock market. Gabriela Santos (Gabriela Santos), global market strategist at JPMorgan Chase, reported that looking ahead, European stocks should continue to be supported given the significant improvement in COVID-19 's vaccination, upcoming financial support measures and the sharp discount rate of European stock markets relative to US stock markets, which can enter a cyclical recovery and hedge against inflation risks.

In the first quarter, Europe's disappointment focused on the slow start of the vaccination process. In April this year, the situation changed rapidly, with the rate of daily vaccination doubling as bureaucratic issues surrounding procurement and distribution were resolved. In fact, the daily vaccination rate in European countries is currently higher than that in the United States, with an average of 0.8% to 0.6%.

In the first quarter of this year, enthusiasm for the US focused on the unexpectedly large fiscal stimulus package approved in March. Attention now turns to Europe, as countries will receive the first grant from the game-changing EU fiscal recovery fund (EU Fiscal Recovery Fund) around the middle of the year, which will help countries in the region recover more evenly this time.

This quarter, investors' focus has shifted to the inflation debate. Cyclical industries can hedge against rising inflation. Europe is the region that provides the biggest cyclical shocks, with 55% of the market made up of cyclical industries (compared with 33% in the United States).

Despite the recent excellent performance of European stock markets, after more than a decade of underperformance, European stocks are still valued at a significant discount to US stocks: the current discount is 18 per cent, compared with an average discount of 10 per cent based on expected price-to-earnings ratios.

Source: FX678

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