The Forward Look—European and UK Credit Views: Q4 2025
Key Takeaways
European green shoots are emerging more gradually than anticipated.
Labour markets show signs of weakening, with unemployment beginning to rise in select countries.
Cracks are showing in highly leveraged sectors as high yield sells off while investment grade remains tight.
Fiscal pressures intensify, with governments facing budgetary challenges and the potential reemergence of inflation as they look to balance the books.
Sticky inflation remains a problem, keeping the risk of a renewed inflationary cycle in focus.
Forward View
Growth Outlook: Slowly Improving
Although we are still confident that a European recovery will continue to develop, the region remains in a low and slow return to growth. The stimulus of low rates (the lowest in the G-10 outside of Japan) combined with increased government spending should help stimulate the region. In particular, German reinvigoration should filter throughout the bloc to support…
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