European shares rise 12 percent until late next year, surpassing the gains of 2010, as rising incomes and historically low interest rates to help businesses overcome the sovereign debt crisis, a survey of 13 strategists sample.
Goldman Sachs Group Inc., the most optimistic forecaster, said that the Europe Stoxx 600 Index will be joined by 20 percent, because the benefits can extend twice as fast as the rate of 14 percent over 26,000 average analyst estimates compiled by us. Bayerische Motoren Werke AG and WPP Plc, the largest global advertising can increase revenue by an average of 18 percent next year.
"People have problems with continued earnings growth and our opinion is do not be surprised if profit margins continue to expand," said JP Morgan Chase & Co. 's London-based strategist Mislav Matejka, European stocks providing rise 12 percent by the end of 2011. "We believe that the pace of earnings growth expected by analysts may actually be very low."
The companies are expanding in Europe, even as a growing concern that weak economies in the region will struggle to finance the deficit. BMW in Munich, the world's largest maker of luxury cars, said Nov. 23 it will shorten Christmas breaks in the plant due to the increasing demand for new models. Dublin-based WPP reported third quarter earnings in October that exceeded analysts' estimates as advertising recovered.
German growth
Germany, Europe's largest economy, raised its growth forecast for 2010 of 03 December, three days after the cost of insurance against default of the Spanish public debt, Ireland and Portugal rose to records. German business confidence rose to a record in November and retail sales rose more in nearly three years in October.
The benchmark Stoxx 600 has advanced 8.7 percent this year as the U.S. Federal Reserve pledged up to $ 600 billion of purchases of bonds to support the world's largest economy. The increase in the paths of advance of 10 percent in 500 of Standard & Poor's. Europe is forecast to grow by 1.7 percent next year, the International Monetary Fund.
The Stoxx 600 rose for the fifth day, rising 0.2 percent to 276.4 at 10:49 am in London, his longest streak of gains since July. Futures on the S & P 500 expiring in March rose 0.3 percent.
The policy of the Fed, bond yields below average and a "sweet spot" for European earnings will drive a rally, said Ian Richards, and Bishop Graham at the Royal Bank of Scotland Group Plc, the third most forecasters bullish forecast of 16 percent for the Stoxx 600.
Zero entries
While the funds focus on stocks around the world followed by the Investment Company Institute in Washington did not attract the net investment in the second quarter, the most recent period for which data are available, bond funds attracted 106 000 million dollars.
"Asset allocation Money has left the stock market," wrote Richards and the bishop in a report of 15 November. "The business sector can use the low cost of debt to drive shareholder returns," even without the funds entering the stock market, they said.
Analyst estimates compiled by us show annual revenue growth in Europe will average 46 percent in 2010 and 2011, more than any time in the last seven years. Deutsche Bank AG in Frankfurt, Germany's biggest bank, extend benefits by 45 percent in 2011, estimates compiled by us. Paris-based Cie. de Saint-Gobain SA, Europe's largest supplier of building materials could increase revenue by 28 percent, according to the data.
The performance gains
The performance gains for Stoxx 600 companies, or profit as a percentage of share price, is 6.53 percent. That is 3.6 percentage points higher than the yield on the benchmark German 10-year government. The spread reached 4.81 points in August, the highest since the financial crisis in 2008.
The value of the shares in favor, according to Goldman Sachs. The Bank of New York, December 1 recommended that investors buy companies with sales in key emerging markets and those in the core European economies like Germany.
Morgan Stanley said Germany and the UK as Europe's best countries for investment. Economic growth may exceed bond yields in both countries, a bullish sign for stocks, the bank wrote in a report dated 29 November. the ten-year German bonds yield 2.93 percent, compared with an estimated 2010 GDP growth of 3.5 percent.
"Pushed"
London-based strategist at UBS AG Karen Olney and Nick Nelson recommends Italy and France last week, the countries said they were "driven by fear sovereign," while "improving earnings momentum." French CAC 40 Index and FTSE Italy MIB are trading at or below 10 times estimated 2011 earnings, compared with a rating of 11 for the German DAX.
estimates of Strategists' to an increase of 11 per cent in European equities in 2010 have proved overly optimistic as the crisis in the region by government debt eroded confidence. The Euro Stoxx 50 of the largest companies in the euro area has lost 4.2 percent so far this year, while the Stoxx 600, which includes the countries of the euro, increased by 8.7 percent.
Shares in most of Europe, indebted countries and increased price swings pushed Europe's benchmark indicator of the volatility of the stock market to a five-month high last week. These trends are likely to continue next year, said Goldman Sachs.
Ireland Rescue
VStoxx Index, which measures the cost of protecting against a decline in the Euro Stoxx 50 rose 33 percent in November by the largest monthly gain since April as a bailout of the European Union led by Spain did not reassure investors the debt crisis is contained. IBEX 35, Spain has fallen 15 percent in 2010 and has ASE Greece fell 30 percent, making it the worst performer among the 24 developed markets tracked by us.
Tammo Greetfeld, Frankfurt-based strategist at UniCredit SpA, said that the Euro Stoxx 50 may fall to 2,400 by mid-2011, affected by the crisis of sovereign debt and cost reduction measures on the economies of the euro region . The reference measure for stocks in the euro area closed at 2,840.71 yesterday.
government liabilities as a proportion of gross domestic product increased in Europe this year on spending to improve the economy and bail out the banks. government debt in the EU reached 77.5 percent of GDP this year from 58.5 percent in 2007, according to IMF data. The proportion will reach 82 percent in 2012, IMF data show.
"Still Improve
"The necessary reform measures to stabilize the euro area pose a risk to short-term growth," said Greetfeld in an interview from 03 December. "Rising tensions within the euro area and the risk of further escalation must be weighed in the global equities market."
In Germany, where the DAX has risen 17 percent so far this year, the Bundesbank last week raised its 2010 growth forecast to 3.6 percent. The Organization for Economic Cooperation and Development and the IMF expects both the global economy will expand 4.2 percent next year.
"Global economic growth continues to improve, therefore argues that stock markets in the medium term," said Kevin Lilley, a fund manager who helps oversee about $ 2 billion at Royal London Asset Management in London. "In all the models run, there is still substantial return to the stock markets. I'm not comfortable with the volatility in the short term, but I'm sticking with the view that global GDP growth remains quite robust."
London-based Morgan Stanley strategist Graham Secker said that although market volatility will remain high until a "comprehensive solution" to the debt crisis is still winning stocks is around 7.3 per percent through 2011.
"We do not believe that the global bull market is over," Secker said in a press conference in London on 30 November. "There will be an opportunity to sell the market in the next one or two years, but the opportunity is now."
The following is a table of the strategists who have given estimates of 2011 for the indexes. implied earnings of about last week are in parentheses.
Prognostic Index Stock Strategist
RBS Richards / SXXP Bishop 320 (16%)
Morgan Stanley's Graham Secker MSDLE15 1,250 (7.3%)
UniCredit Tammo Greetfeld SX5e 2900 (+2.1%)
Goldman Sachs SXXP Peter Oppenheimer, 330 (20%)
Mislav Matejka JPMorgan MSDLE15 1310 (12%)
Bank of America Merrill Lynch, Gary Baker SXXP 300 (8.7%)
Societe Generale Claudia Panseri SXXP 310 (12%)
Deutsche Bank SXXP Gareth Evans 315 (14%)
Exane BNP Jansen / SXXP Kreckel 305 (11%)
Macquarie Matthias Joerss SX5P 2850 (9%)
Commerzbank team SX5e 3200 (+13%)
Edmund Shing Barclays SX5e 3350 (+18%)
Garry Evans HSBC SXXP 315 (14%)
UBS * Nelson Olney SXXP (16%)
* UBS has forecast earnings of 16 percent for the Stoxx 600
no dividends for the year 2011.
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