Pioneer sees threats to Euro investments
20 August 2008

Written by Sophie Baker

Pioneer Investments has maintained an underweight position in Euro Government bonds and increased its overweight in US corporate and high yield bonds.

In terms of European equity, Pioneer sees monetary conditions as tight compared with those in the US. Although it maintains that this could add to the Euro’s strength and weigh further on business confidence in Germany, Pioneer says sentiment is fragile and suggests that adding to current exposure is premature.

The organisation remains positive in its outlook for the US, which it says is “probably already on the way to recovery”. Emerging markets, with the exception of India, are benefiting from settling food inflation, and Pioneer says that commodity-driven markets, such as Latin America and Russia, are likely to suffer from a sharp correction in global raw-material prices.

Fixed Income in the European Government is underweight, and Pioneer cites the unsupportive nature of interest rate expectations as their reason for drawing back from this area of investment. Euro Corporate fixed income, however, remains overweight as Pioneer sees “an excellent risk-reward ratio on shorter maturities” along the credit spread curve.