Europe's equities are likely to comfortably outperform Wall Street this year, according to Baring Asset Management. Barings' European investment team deputy head Neil Robson said the worst of the impact of Asian price deflation was behind Europe. Quality companies would prosper despite pricing pressures because of buoyant consumer confidence. 'We are having a consumption party in Europe. It's like being in one long continuous party,' he said. Volume growth made up for price reductions, he said. Finnish mobile-telephone maker Nokia, for example, has thrived despite substantial price drops each year for its products. Other industries that could benefit from the consumption boom included quality media stocks and vehicle-makers, he said. 'Deflation is only a problem if people say we are not going to purchase something,' the London-based Mr Robson said in Hong Kong yesterday. He expected solid performances by European stock exchanges this year but the gains would remain in single-digit territory. Globally, Barings was overweight on Europe and the Asia-Pacific and underweight on the United States. Barings' global weighting for Europe, including Britain, was 38.1 per cent, compared with a benchmark 33.9 per cent. The US weighting was 40 per cent compared with a benchmark weighting of 54 per cent. The asset-management house recently upgraded Japan from underweight to neutral, which diluted its overweight stance on Europe. Mr Robson said the biggest threat to Europe's outlook came from the possibility that global interest rates could rise because of increasing demand for capital out of the US and Japan. There was room for the European Central Bank (ECB) to cut rates, he said. The ECB would do everything it could to keep interest rates low because of business pessimism. Business confidence had been hit by the deflationary impact of the Asian crisis and increased price transparency across country borders caused by the introduction of a single currency. The worst of the slump in industrial production had passed, Mr Robson said. Most of the impact of Asian deflation had worked its way through the system following a boom in exports from Asia to Europe, with signs of price rises appearing. Asia had seen a drop in the prices of assets, such as property. In Europe property prices were showing signs of rising. He was not concerned about the weakness of the euro - no surprise, given the strength of the US economy.