The Forward Look—European and UK Credit Views: Q3 2025
Key Takeaways
Tailwinds in Europe should start to show green shoots in the quarter ahead.
Labour markets to remain tight; watch for signs of weakening.
Supportive market environment for European credits, both public and private, as US dollar diversification continues.
Uncertainty remains the largest counter to Europe’s prospects. Budgetary challenges, US tariffs, and elevated distress among some sectors could provide some volatility.
Forward View
Growth Outlook: Improving (Modestly)
Although the immediate prospects for European economies are not displaying strong signs of expansion, the tailwinds supporting future growth are gaining momentum. Defence spending plans, along with other pro-growth government agendas, are becoming more prominent. In particular, the German government’s actions to significantly loosen its purse strings have enhanced the region’s overall outlook, given its outsized role in intra-European trade.
Recession Probability:…
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