European stocks seen bouncing but still down in 2008
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 .STOXX50E 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.
"By then we will see the impact of some of the Federal Reserve cuts, plus we will hopefully be through the worst writedowns at the banks. That should allow for some traction to be seen."
The Fed is widely expected to cut interest rates again later on Tuesday by at least half a percentage point from 3 percent at present, and cuts are also seen this year from the European Central Bank.
Forecasts are well down on the 4,790 the index was seen finishing the year at in a poll taken in December, and the 4,900 predicted in September's survey.
An index of European market volatility .V1XI shot to a two-month high on Monday, up 14 percent, reflecting just how nervous investors are.
On a wider markets level, analysts said the MSCI World Index would likely hit a bottom in the second quarter of the year, and predicted a fall of some 20 percent from its peak last summer.
"After reaching a low around the middle of the year, equity markets are expected to rebound on expectations that 2009 will be better for global growth and on an end to the steady drip of bad news from the financial system," said Tony Dolphin at Henderson Global Investors.
Analysts also remained confident about Germany's DAX .GDAXI index despite having fallen around 23.4 percent already this year. They see it back to 6,600 by the end of June, and hurtling to 7,700 by year-end.
(Editing by Greg Mahlich)
