admin European stocks hit a fresh record high on Friday, and analysts are confident there is further upside as prices remain low compared to the U.S. This has been a much-awaited change of situations in the course of the ongoing pandemic.
Details on the Record High Numbers
The pan-European Stoxx 600 hit a high of 438.29 on Friday, surpassing levels seen in late February 2020, just before the region’s stocks sold off as the coronavirus pandemic hit its nations hard. Friday’s move marks a more-than 55% jump from a pandemic low seen on March 18, 2020. Analysts at BCA research noted, “The coming two years should be kind to euro area stocks.” They added that this was partly because of expectations that borrowing costs will rise globally, making certain equities, such as financial stocks and beaten-down sectors, more attractive than bonds.
Two analysts at the Bank of America propounded, “European equities are set to benefit from a sharp acceleration in euro area GDP (gross domestic product) growth over the coming months, but that is due to the boost from reopening and the support from a powerful U.S. recovery, rather than a function of the dispersal of NGEU funds.”
The Recovery Mode for Europe: Future Possibilities
The EU agreed last year to raise 750 billion euros ($897 billion) from public markets in so-called Next Generation EU funds. The money, however, is unlikely to be disbursed before the summer months. Roger Jones, head of equities at London and Capital asserted, “Although we have seen a price recovery in the index, there is still a way to go to get an earnings recovery. This is expected to materialize next year when market earnings estimates are forecast to be above 2019 levels.”
European companies are expected to do better in the coming months, with Goldman Sachs analysts forecasting 40% earnings-per-share growth in Europe this year. Corporates are seen benefiting as the economy recovers, the region’s long-awaited fiscal plan in is rolled out and its vaccination campaign is stepped up. The recovery in Europe has been held back by a vaccine rollout that has lagged other parts of the world and the subsequent waves of infections across the world.
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