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Erste Group says when turning the Ifo World Economic Climate index toward Eastern Europe, the picture becomes a bit rosier. What follows is Erste's note on the subject.

The Ifo business cycle clock presents a pretty straightforward look at where in an economic cycle we are when basing this view on sentiment. The Ifo World Economic Climate is the arithmetic mean of the view on the current situation and outlook. Graphically, it tends to rotate clockwise, giving a pretty good feeling on where we are in terms of the economic cycle - based on expectations. This positioning within the cycle, consequently, could serve as an indication of when to push more into equity markets (and when not to). The business cycle clock picturing the world sentiment clearly puts the economy into the boom phase, which would still create some positive immediate environment for equities, but this positioning does not provide strong momentum.

Based on expectations, the cycle is still in the upswing area, just at the edge of moving over to the boom area, though. Hence, the region should be more the place to be when looking for equity investments. However, the growth outlook is fading away - or, to put it more precisely, it is moderating. This becomes visible in consensus EPS growth as well as in earnings revisions, which continued to head south. In this environment, the best escape would be if the scenario that we outline in the macro section of this report comes true. With export-driven growth slowing down, all hopes rest on domestic consumption. Consumer confidence is pretty sound in Germany and the signs are that some recovery in this segment could kick in in CEE markets as well. Also, high capacity utilisation has a chance for investment to support growth. However, this scenario might become tangible only in 2012. Turkey is the exception to the rule, coming with its own problems. One striking thing might be the kind of indecisiveness of the indicator, in particular for Eastern Europe. In previous quarters, it has been manoeuvring quite a zig-zag course within the area of the upswing. Strong volatility in sentiment again confirms the very much news-driven market situation. When setting up the business cycle clock on individual countries, China and Brazil are seen to already be in the downswing area (again based on expectations), while Russia, India, Mexico, Indonesia and Turkey are in the boom area right now.