London, Dec. 1 (BNA): Uncertainty over the Covid-19 pandemic has not affected the prospects for European stocks to reach record levels in 2022, buoyed by a rebound in corporate earnings, according to a Reuters poll of 23 fund managers, strategists and. brokers.
The survey, which was conducted over the past two weeks, predicted that the German DAX and the French CAC 40 would reach unprecedented high levels by mid-2022, up about 8% and 6% from Monday’s close, respectively.
The pan-European STOXX 600 index is expected to rise 7% and reach 500 points by July, 10 points more than the peak age recorded on November 17, according to a November 15-30 survey.
Although European shares fell 3.7% on Friday when concerns about the impact of the novel coronavirus variable triggered a broad sell-off, they are still up about 17% since the start of the year.
A strong recovery in earnings from the shutdown-induced recession in 2020 underlies the strong performance for the year.
According to the latest Refinitiv I/B/E/S data, the third-quarter earnings season saw earnings jump 58.8% after increases of 96.4% and 152.6% in the first two quarters.
“We expect earnings to be the main driver for global equities, and this also applies to the eurozone,” said Philippe Lisebak, chief global strategist at Credit Suisse.
It expects higher single-digit equity returns in 2022 compared to double-digit returns in 2021.
However, the spread of the pandemic in Europe and announcements of new social restrictions in Austria and elsewhere have hurt sentiment.
Eurozone economic sentiment slumped in November amid consumer concerns about a fourth wave of the coronavirus, while German business sentiment deteriorated for the fifth consecutive month in November as supply bottlenecks weighed on manufacturing.
Thomas Hildebrandt, senior portfolio manager at Evlibank in Helsinki, said: “Headwinds in Europe are suddenly increasing with higher energy prices, more injuries and delays in delivery. This creates uncertainty in the short term, but the situation should ease until next year.” .
Most analysts still have a positive outlook going forward, but some are forecasting a bleak year for stocks.
Stephane Ecolo, a strategist at Brokerage Tradition, sees the STOXX 600 index losing about 30 points to 430 points at the end of 2022, as economic growth slows.
“I think corporate earnings are likely to deteriorate over the next six months…on the back of ongoing disruptions in the supply chain, reopening of fading consolidation, potential risks of restrictions, and higher real interest rates,” said Ikolo.
Among the risks mentioned by poll respondents is rising inflation that would force the European Central Bank to accelerate cuts in monetary stimulus.
Consumer prices in Germany rose 6% year-on-year after rising 4.6% in October, adding to pressure on the European Central Bank to respond.
But higher interest rates are likely to bolster European banks, which are already up 28% this year, because they usually thrive when interest rate expectations rise.
The French presidential election in April provides more uncertainty in 2022, as incumbent President Emmanuel Macron is likely to face a far-right challenger.
“The victory of a Eurosceptic president would be a danger to European integration,” said Liesbach of Credit Suisse.
MI