The Forward Look—European and UK Credit Views: Q2 2026
Key Takeaways
The Iran war’s impact has largely been contained to pronounced uncertainty, which has disrupted a European growth turnaround.
For the quarter ahead, assuming the Strait of Hormuz remains shut and associated commodities remain supply constrained, the risk of stagflation is rising for Europe as growth slows and inflation may become entrenched.
On the positive side, manufacturing appears to be entering a cyclical upturn as capital expenditure, defence, and infrastructure investment start to materialise.
Spreads remain at historically tight levels, albeit off their lows. However, yields have jumped as benchmark yields increase on the expectation of future rate rises. As a result, credit yields remain attractive relative to stocks, which have rebounded from recent lows.
Forward View
Growth Outlook: Delayed Turnaround
This is not 2022. For Europe, the situation is very different compared to when Russia attacked Ukraine. On the growth…
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