European stocks seen bouncing but still down in 2008

By Nigel Davies

LONDON (Reuters) - European stock markets are likely to ride through the stormy times this year to recover around 24 percent by December, but that will still mean an overall loss for the year, a Reuters poll showed.

The poll of 11 analysts, taken last week before markets erupted and JP Morgan Chase snapped up the latest credit crisis casualty Bear Stearns, showed European bourses recovering moderately, but not getting back to their January 1 levels.

The DJ Euro Stoxx 50 index was seen inching back to 3,700 by the end of June, and to 4,250 by the end of December, still some way off the six-year highs of 4,500 hit last summer before the credit crisis took hold.

That would mean a loss of 3.4 percent this year after the index began the year close to 4,400, the first fall in the market since 2002. In 2007 the index rose by around 7 percent.

Only one equity strategist said the index would fall further, to 3,150, by the end of the year. The most optimistic forecast was 4,950.

The euro's recent surge to record highs approaching $1.60 will make it all the harder for top European companies to progress this year.

"There is a change in the complexion of markets, but to change forecasts in just three days is an invitation to folly," said Stephen Pope at Cantor Fitzgerald having made his predictions before the weekend's surprise news on Bear Stearns.

He said U.S. interest rate cuts would provide some stimulus to markets in the second half of the year.