Home Finance European shares seen holding near current levels through 2022 – Reuters poll

European shares seen holding near current levels through 2022 – Reuters poll

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The German share value index DAX graph is pictured on the inventory trade in Frankfurt, Germany, February 22, 2022. REUTERS/Timm Reichert

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LONDON, Could 25 (Reuters) – Central financial institution coverage tightening, fears of a recession and the financial affect of the struggle in Ukraine are all anticipated to maintain a lid on any vital advance in European shares for the rest of 2022, a Reuters ballot discovered.

The ballot of 21 fund managers, strategists and analysts, surveyed over the previous two weeks, forecast the pan-European STOXX 600 (.STOXX) index would attain 450 factors by the tip of the yr, a 3.1% acquire from Monday’s shut.

European shares have sunk over 10% to this point this yr, struggling their worst begin to a yr because the COVID outbreak in 2020 and their second-worst begin since 2008.

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The decline in European shares comes regardless of an upbeat first-quarter reporting season that’s anticipated to point out a 41.5% leap in earnings, based on Refinitiv I/B/E/S information. Excluding the vitality sector, earnings are anticipated to have risen 22.4%.

However the outlook stays unsure, with regional equities dealing with plenty of headwinds shifting in the direction of the second half that cloud the prospects for earnings progress.

The continued struggle in Ukraine, persistent inflation and elevated recession danger are all elements including to the unsure backdrop, based on Stephane Ekolo, world fairness strategist at Custom.

“We’re nonetheless cautious on equities given the very troublesome geopolitical and macro backdrop coupled with a danger of margins pressures,” stated Ekolo, who forecast the STOXX 600 index would drop roughly 55 factors to 380 by the tip of the yr.

One of many important dangers cited by ballot respondents was the pace at which central banks, together with the European Central Financial institution (ECB), are anticipated to tighten coverage all year long to rein inflation in.

European Central Financial institution President Christine Lagarde stated on Tuesday she noticed the ECB’s deposit price at zero or “barely above” by the tip of September, implying a rise of no less than 50 foundation factors from its present stage. learn extra

Cash markets are pricing in over 100 foundation factors of ECB rate of interest hikes by the tip of the yr.

“The ECB shifting aggressively on financial coverage, particularly when a progress slowdown is predicted will weigh negatively on the area,” stated Philipp Lisibach, chief world strategist at Credit score Suisse.

Lisibach additionally highlighted extended larger vitality costs, a spillover or escalation of the Ukraine battle and a stronger euro as key dangers to the outlook for euro zone equities.

The ECB final raised rates of interest in 2011 and its deposit price has been in unfavorable territory since 2014.

Amongst nation benchmarks, Germany’s DAX (.GDAXI) was seen ending the yr at 14,000 factors, down marginally from Monday’s closing value, based on the ballot.

Britain’s FTSE 100 (.FTSE) was seen at 7,494 on the finish of the yr, little modified from Monday’s shut, whereas France’s CAC 40 (.FCHI) was seen edging larger to six,400.

(Different tales from the Reuters world inventory markets ballot package deal:)

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Reporting by Samuel Indyk; Further polling by Milounee Purohit, Vijayalakshmi Srinivasan, Julien Ponthus and Danilo Masoni; Enhancing by Bernadette Baum

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