Advisers divided on Europe's fate
Advisers are split about the future direction of Europe due to seemingly contradictory economic indicators, says Macquarie Private Wealth head of research Riccardo Briganti.
The bank recently conducted a series of interviews with its financial advisers. Some felt the European debt crisis was no longer an issue they needed to worry about, but for other planners "it's the most important issue in the world", Briganti said.
"How can you get those completely opposite views?" he asked.
On the one hand, the VIX index - a popular measure of global volatility and investor 'fear' - has gone down to normal levels in recent months, Briganti said.
"That says financial market participants are not as concerned about what's happening in Europe," he said.
But on the other hand, Italian and Spanish sovereign bond yields have been trending up since April, suggesting people are more concerned about the default risks of those countries than they were at the beginning of the year, Briganti said.
The question is whether or not Europe's woes become a systemic problem for the world, he said.
"If those localised problems become a banking problem in Europe and that banking problem becomes a banking problem for the world, Europe really does loom large as an enormous risk to financial markets," Briganti said.
However, there is now much more certainty among investors that the authorities in Europe and the IMF (International Monetary Fund) will do their utmost to quarantine Europe's problems from the broader financial system, he added.
"That's why you can still have the sovereign risk within Europe increasing, and at the same time have financial markets say this is not a problem," Briganti said.
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