EU leaders are imposing waves of spending cuts and tax hikes to show investors that they're serious about improving their balance sheets and to encourage them to buy eurozone sovereign debt -- but is this wise?
Reuters' Carmel Crimmins and Gavin Jones note, "the austerity zeal risks tipping the continent back into recession ... meaning further austerity is required."
"You don't cut your way to growth," adds Stephen Kinsella, professor of economics at the University of Limerick.
So where's the confidence fairy to correct this negative cycle? That was supposed to come from the EU Summit in Brussels last week. Except it failed to instill much confidence at all.
Italy sold 3 billion euros of five-year bonds at a 6.5% yield, "doing little to dispel concerns about the country's longer-term financing sustainability." The five-year yield is at its highest in 14 years, up from 6.30% just a month ago.
The Rome-based Treasury sold the bonds at a 6.47% yield, up from 6.29% at the last auction on November 14.
The EU expected stronger demand and lower yields, but shouldn't have been surprised by the less-than-enthusiastic response from global investors.
"Obviously 5-year funding rates of 6.5 percent are unsustainable and the cost of funding will become a crucial factor in the first quarter of next year," said WestLB rate strategist Michael Leister.
Reuters reports benchmark 10-year Italian yields were flat at 7.13%, with yields on the September 2016 bond auctioned almost 13 basis points lower on the day at 6.73%.
Many investors believe that if Europe hold together and pulls through, there should be considerable upside for stocks.
With that in mind, we created a universe of European companies trading on the U.S. market exchange and looked for names with the most significant levels of institutional buying in the current quarter.
It seems institutional buyers, such as hedge funds, think these names have much to gain from a rebound -- or that they might simply power through whatever comes their way. Do you agree? (Click here to access free, interactive tools to analyze these ideas.)
4. ASM International
5. Sensata Technologies Holding
6. Altisource Portfolio Solutions
7. Intercontinental Hotels Group
9. Mettler-Toledo International
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman and Alexander Crawford do not own any of the shares mentioned above. Institutional data sourced from Fidelity
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