The European Central Bank's (ECB) bond-buying initiative and a faltering single currency combined to push Germany's DAX to an all-time high during the first quarter of 2015. At the start of the year, the DAX stood at 9,806 points, meaning it gained 22 per cent by the end of March - an unprecedented rate of expansion.
The eurozone's other main benchmark, France's CAC 40, followed suit despite lingering anxieties over the health of the domestic economy. Italy's FTSE MIB and Spain's Ibex were also heading in the right direction, buoyed partly by tumbling government borrowing costs. But it was Germany, as Europe's biggest export economy, that was the chief beneficiary of the euro's slide towards parity with the greenback.
The euro has fallen 11.8 per cent against the dollar since January, helping to drive export orders and boost manufacturing. Last month's exports from the eurozone economies recorded their sharpest monthly increase since April 2014, while Markit's latest purchasing managers' index (PMI) rose to a 10-month high. The PMI readings for Germany, Italy and Holland all point to expansion, although those for France, Austria and, of course, Greece remain in the doldrums.
The fall in the value of the euro is also having some unintended consequences. Although goods from the continent have become cheaper for foreign buyers, imports into the eurozone - particularly from emerging markets - are fast losing ground. Economies with big primary exports, such as Brazil, were stung by the US QE programme. The ECB's action has revived the spectre of these so-called 'currency wars'. For the UK, continued euro weakness, while doubtless a wheeze for holidaymakers, is potentially ruinous for our balance of trade, as the UK runs a perpetual trade deficit with all of our partners in Europe, bar Ireland.
It is uncertain whether the ECB's foray into QE will substantially increase liquidity in the 'real' economies of the eurozone, rather than simply shoring-up bank balance sheets. The US experience suggests this is by no means a given. So if you've got some exposure to European equities, enjoy the surge while it lasts.
