(Bloomberg) -- Strategists at Goldman Sachs Group Inc. and UBS AG raised their forecasts for European stock indexes as the economy recovers from the deepest recession since World War II and earnings improve. Goldman Sachs lifted its year-end estimate for the Dow Jones Stoxx 600 Index to 260 from 235, while UBS’s Nick Nelson increased his target for the FTSEurofirst 300 Index to 1,100 from 1,000.
The Stoxx 600 has rallied 47 percent since March 9 as the German and French economies unexpectedly expanded and earnings at companies from L’Oreal SA to Roche Holding AG spurred speculation the worst of the recession is over. The FTSEurofirst 300 has climbed 46 percent in the same period. “While we agree that the market tends to make its strongest returns while the economy is still contracting, albeit at a slowing rate, it tends to make further gains as the economy begins to expand,” a team of Goldman Sachs strategists led by Peter Oppenheimer in London wrote in a report dated yesterday.
UBS upgraded its 2010 earnings-per-share forecast for the region to an increase of 25 percent from a 15 percent gain. Analysts expect earnings for companies in the Stoxx 600 to grow 5.8 percent in 2009 and 28 percent next year, estimates compiled by Bloomberg show.
‘Turning Point’
“The macro data continue to give us confidence that we have hit the turning point for earnings momentum,” UBS’s Nelson wrote in a report today. “Given our view on the bounce back in earnings growth next year and increasing conviction that the economic cycle has turned, we feel the fundamental backdrop remains supportive.”
Goldman Sachs upgraded its recommendation on banks to a “modest overweight” from “neutral” and lifted the construction and materials and food and beverage industries to “neutral” from “underweight.” The firm cut its ratings on utilities and technology companies to “neutral” from “overweight.” Goldman said it maintains a “broadly cyclical bias,” preferring shares that are more linked to economic growth.
No comments:
Post a Comment