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LibDem MEP says look to Europe to protect against US share crash

Investors should look to Europe to protect their investments in the face

of a widely predicted hard landing for US markets, according to LibDem Euro

MP and economist Christopher Huhne.

Huhne believes European markets will look a more attractive proposition

following a slump in US equities. He forecast that the slump in the US

would come next year rather than this year.

He told a PIMS conference meeting: “We could go through another year

without any landing – hard or soft – but you cannot suspend the laws of

economics forever.

“There is a serious risk of a bear market in the US. We have reached the

stage where investors need to go on acquiring US assets at the same rate as

at present to fund the US deficit. I suspect that US interest rates have

peaked while European interest rates are going to rise.”

He claimed the struggling euro currency had been a victim of its own

success and said it was robust enough to stand outside any market

disruption from external US shares.

This position of strength has been achieved through an upsurge in business

confidence in Germany. German bond yields are still 1 per cent lower than

10-year bond yields in the US. Crucially, investors are still willing to

invest in the euro zone and there is no danger of unsustainability.

However Huhne cautioned against putting cash in emerging markets.

He said: “A G7 slowdown due to a hard US landing; the fallout from

political shock in countries such as Russia, Argentina and Indonesia make

it risky.”

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