The poll of 21 fund managers, strategists and analysts interviewed over the past two weeks predicts the pan-European STOXX 600 index will hit 450 points by the end of the year, a gain of 3.1 % from Monday’s close.
European stocks have fallen more than 10% since the start of the year, suffering their worst start to the year since the COVID outbreak in 2020 and their second worst start since 2008.
Chart: STOXX 600 year-to-date –
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The decline in European equities comes despite an upbeat reporting season for the first quarter that is expected to post a 41.5% jump in earnings, according to Refinitiv I/B/E/S data. Excluding the energy sector, profits should have increased by 22.4%.
But the outlook remains uncertain, with regional equities facing a number of headwinds heading into the second half that are clouding the outlook for earnings growth.
The ongoing war in Ukraine, persistent inflation and heightened risk of recession are all adding to the uncertain backdrop, according to Stephane Ekolo, global equity strategist at Tradition.
“We remain wary of equities given the very challenging geopolitical and macro-economic backdrop, coupled with the risk of margin pressures,” said Ekolo, who forecasts the STOXX 600 index to drop around 55 points to 380. points by the end of the year.
One of the main risks cited by survey respondents is the speed with which central banks, including the European Central Bank (ECB), are expected to tighten policy throughout the year to rein in inflation.
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European Central Bank President Christine Lagarde said on Tuesday she sees the ECB’s deposit rate at zero or “slightly above” by the end of September, implying an increase of at least 50 basis points. baseline from its current level.
Money markets are pricing in an increase of more than 100 basis points in ECB interest rates by the end of the year.
“The ECB acting aggressively on monetary policy, particularly when slower growth is expected, will weigh negatively on the region,” said Philipp Lisibach, head of global strategy at Credit Suisse.
Mr. Lisibach also pointed to a prolonged rise in energy prices, a spillover or escalation of the conflict in Ukraine and a stronger euro as the main risks to the outlook for eurozone equities.
The ECB last raised interest rates in 2011 and its deposit rate has been in negative territory since 2014.
Among national benchmarks, the German DAX was seen to end the year at 14,000 points, down slightly from Monday’s closing price, according to the survey.
Britain’s FTSE 100 was seen at 7,494 points at the end of the year, little different from Monday’s close, while France’s CAC 40 was seen up slightly at 6,400 points.
(Other articles in the dossier on the Reuters survey of global stock markets:
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