A one-time bear is looking at Europe with a little less gloom.
Michael Darda of MKM Partners, an institutional equity research, sales and trading firm, said in 2011 that European Central Bank rate hikes "will risk more debt trauma in the periphery and a hard-landing scenario for the eurozone as a whole."
Now he's not so gloomy thanks to the European Central Bank's decision to pump liquidity into the financial system.
"Although we would not be surprised to see a 5-7 percent pullback in major global equity markets given the recent run, we no longer fear a return to the 2011 lows," Darda says in a report, as reported by the Wall Street Journal.
"Moreover, we continue to believe European large cap equities will outperform the S&P 500 in local currency terms in 2012 even if the S&P 500 has a relatively good year (up high single-digits/low double-digits)."
The European Central Bank has recently pumped a vast amount of liquidity into the continent's banking sector via low-cost loans with the aim of loosening credit there.
In December, the central bank lent financial institutions the euro-equivalent of $637 billion in three-year loans, officially known as Long Term Refinancing Operations.
Thanks to such a move, yields in government bond auctions are falling, a welcome relief for weary markets.
Another round is due in February, although some point out organic lending growth must soon follow on its own.
"People aren't prepared to lend to the banks, so the ECB is just flooding the market with liquidity," says Christopher Wheeler, an analyst at Mediobanca SpA in London, according to Bloomberg.
"But it's only a temporary fix. The ECB is only buying time with these loans hoping that things will improve."
© 2014 Moneynews. All rights reserved.