Flirting with records: European stocks return to normal in 2021: Reuters poll
LONDON/MILAN (Reuters) – Optimism around vaccine developments and expectations of a strong rebound in business confidence and profitability will push European stocks to near record highs next year, as policymakers appear poised to sustain the stimulus.
A Reuters poll of 26 fund managers, strategists and brokers surveyed over the past two weeks expects the STOXX 600 to climb to 430 points by the end of 2021, just a hair below record highs of February, as economic activity returns to normal following the COVID-19 downturn.
This is up 10.6% from Monday’s closing price. It also represents a 60% jump from the low of 268 points hit in March when lockdowns imposed across the world to limit the spread of the pandemic sparked a rush to safety in global markets.
Promising results from three major pharmaceutical companies on their vaccine trials have encouraged a wave of optimism in global stock markets, with the latest poll signaling a dramatic shift in expectations for the STOXX 600.
In the previous quarterly survey, the index only reached 375 points in December and 410 points a year later.
“European economies and markets have a lot to gain as the global outlook improves,” said Tomas Hildebrandt, senior portfolio manager and strategist at Evli Bank in Helsinki.
“We expect the pandemic to be suppressed, U.S.-China relations to improve, global trade to be boosted, and global economic recovery to continue,” he said. he added, warning however that uncertainties remain significant.
Analysts said possible risks to European stocks could stem from further lockdowns, a failure to strike a Brexit deal and delays in the European Union’s policy response to mitigate economic damage from the pandemic.
Still, the mood remains optimistic after promising trial results from AstraZeneca, Moderna and Pfizer this month raised the prospect that vaccine injections will become available in much of Europe by the start of next year.
“While there are risks associated with implementing vaccination programs around the world, overall it appears countries will be able to sustain a return to near-normal,” said Neil Wilson. , chief market analyst at Markets.com in London.
Since Pfizer’s announcement on Nov. 9, the global economic outlook has continued to improve, with IHS Markit’s composite PMI of future eurozone output rising to 60.1 in October from 56.5. November, its highest since February.
European stocks have risen 14% so far in November and are on track for their best month ever, although the current quarter will be difficult for companies due to the resurgence of the pandemic.
Stocks hardest hit by COVID-19, from oil, banks to travel and leisure, have led the charge and are likely to remain favored as investors move away from the so-called pandemic darlings of large-cap tech stocks.
Germany’s industrial-heavy DAX index will gain more than 10% from current levels by the end of next year, hitting 14,500 points, not far from the record high reached in February, according to the Reuters poll.
But there is more than just the vaccine.
Expectations of more stimulus from the European Central Bank and the bloc’s €1.8 trillion plan to recover from recession will also offer support, along with expectations that London and Brussels will strike a deal. last-minute Brexit trade deal.
The stimulus and Brexit will encourage “global investors to rebuild investment across Europe from a perspective other than just the prospect of pandemic progress,” said Chris Bailey, European strategist at Raymond James in London.
According to the poll, Britain’s top FTSE 100 stock index is expected to reach 6,900 points by the end of 2021, up 8.9% from Monday’s close. The French CAC 40 is seen at 6,172 points, up 12.4%, the Italian FTSE MIB at 24,000 points, up 10.6%, and the Spanish IBEX at 9,000 points, up 12 .8%.
Chart: STOXX poll chart, here
(This version of the story corrects attribution of the poll to Reuters in the headline. The poll was not conducted in conjunction with IPSOS.)
Reporting by Joice Alves in London and Danilo Masoni in Milan; Additional reporting by Julien Ponthus, Elizabeth Howcroft and Stefano Rebaudo; Additional polling by Richa Rebello and Manjul Paul; Editing by Ross Finley and Alison Williams