September 30, 2009 / 12:33 PM / 10 years ago

Global stocks to pause for breath after sprint

LONDON (Reuters) - Major world stock markets will likely stutter to the end of the year after a strong push since March to try to wipe out massive losses from a stinging global recession, Reuters polls found.

Quarterly surveys of over 180 equity strategists globally showed leading stock markets in New York, Tokyo and London would all end the year around current levels after clocking huge double digit gains since dismal lows in March.

That would still leave them down on 2008’s huge losses, but would be a remarkable turnaround, powered by growing optimism that a recovery is at hand after the worst recession in decades.

Thirteen countries’ stock markets surveyed were seen at higher levels than year-end forecasts given in June, with first-time forecasts for South Africa also showing continued upward momentum.

“The fundamentals have improved. However figures are mostly driven by government and central bank intervention. When this wears off the underlying fragility of the world economy will once again be demonstrated,” said Philippe Gijsels at BNP Paribas Fortis.

“Sentiment has become way too optimistic.”

Governments and central banks around the world have injected trillions of dollars of economic stimulus measures to support fragile economies, which will in time be removed bit by bit as a recovery sets in.

That has pushed global stock gains to over 17 percent this quarter alone.

But after a breather and possible slip over the coming company earnings season, major stock markets are forecast to get back on a moderate pick-up heading into 2010.

“The outlook for equity markets will stay favourable over the next months — further price gains are expected, driven by higher multiples and a recovery in earnings,” said Gerhard Schwarz, head of global equity strategy at UniCredit.

He cited an increase in new company orders and industrial production as positive impulses for corporate profitability.

Rallies in emerging market countries were forecast to continue this year, with Brazil and India powering towards record gains of over 70 and 80 percent.

Russia too was forecast to end the year higher than current levels and make gains of over 100 percent this year.

FURTHER RISES NEXT YEAR

By the end of June next year the leading S&P 500 index in the U.S., Nikkei in Japan, and the main European indices in France and Germany were all forecast to be up between 5 and 15 percent from current levels.

Some conceded gains could be hampered by any potential rise in interest rates from the world’s leading central banks or, in the case of the United States, if the dollar continues to remain weak and hurt the overall outlook for the economy.

A more positive tale was being spun across emerging markets which have seen investors piling back in as appeal for higher yielding assets picks up.

Brazilian stocks were forecast to gain close to 20 percent by June next year. In South Africa, the market was predicted to leap another 17 percent after an already impressive 15 percent this year.

Asia too, forecast for a long time to lead the world out of recession, was also set for impressive gains. The polls forecast gains of over 20 percent on the main market in Hong Kong and of 6 percent in Taipei.

With additional reporting and polling by Reuters bureaux in New York, Toronto, Sao Paulo, Paris, Frankfurt, Johannesburg, Milan, Moscow, Mumbai, Hong Kong, Tokyo, Taipei, Sydney and the Bangalore Polling Unit; Editing by Jon Loades-Carter

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