LONDON European stocks will make little headway before June as concerns about future U.S. rate increases and Britain's move to start its divorce from the European Union discourage investors from placing strong bets, a Reuters poll found.
The poll of more than 20 traders, strategists and fund managers gave a median forecast for the pan-European STOXX 600 index of 362 points by the end of 2017 - up over 5 percent from Monday's closing level of 343.23.
However, the benchmark index will make little progress before the middle of next year, when it will trade at 345, according to the poll, taken in the past week.
"European equities will struggle to make much headway in the first half of 2017 as investors struggle with the combined effects of the UK triggering Article 50 and, probably, higher U.S. rates," Bill McNamara, analyst at Charles Stanley, said.
"However, as those fears subside somewhat and the outlook becomes clearer, markets should recover in the second half."
British Prime Minister Theresa May said on Sunday she would invoke Article 50 of the EU's Lisbon Treaty by the end of March. That would give Britain two years to clinch one of the most complex deals in Europe since World War Two.
The UK economy has shown resilience since the vote to leave the EU, but there are concerns that business investment and the wider economy will slow. Brexit could also hit the European economy, since Britain is a key market for many countries.
Among leading investment banks, Goldman Sachs predicted the STOXX 600 closing this year at 335 points, Barclays forecast it to finish at 360 points and UBS saw it at 340 points.
The euro zone's blue-chip Euro STOXX 50 index .STOXX50E was likely to rise to 3,075 points by the end of June 2017 before climbing to 3,225 by the end of next year.
France's CAC .FCHI was predicted to rise 1 percent to 4,500 points by the end of 2017 and Germany's DAX .GDAXI was expected to close next year at 11,150, up around 5 percent from Tuesday's levels, the poll found.
"The diminishing impact of quantitative easing is likely to leave stocks unchanged throughout 2017. However, signs of fiscal reform is seen to provide support and stop any significant stock market rout from taking hold of markets," Jonathan Roy, advisory investment manager at Charles Hanover Investments, said.
(Additional reporting by Sudip Kar-Gupta and Danilo Masoni, editing by Larry King)