By Julien Ponthus
The recovery from the coronavirus financial crash will take time for European stocks which are expected to end 2021 around 10% below this February's record high, a Reuters poll of about 30 fund managers, strategists and brokers showed.
Taken over the past two weeks the survey showed the pan-European STOXX 600 would reach 347 points, 368 points and 390 points by end-2020, mid-2021 and at the end of 2021 respectively.
The index hit a record high of 433.9 points on Feb. 19 but the coronavirus pandemic and lockdowns imposed across the world to limit its spread triggered a global sell-off in anticipation of recessions caused by entire countries closing down.
On March 16, less than a month after hitting their peak, European stocks fell to a bottom of 268.57 points, a collapse of over 38% with airlines, hotels, banks and energy companies among the worst hit stocks.
To the disbelief of many investors, European stocks quickly embarked on a whopping 30% rebound, fuelled by unprecedented monetary and fiscal stimulus coupled with hopes for a vaccine and economies swiftly reopening.
The rally, however, lost its steam at the beginning of May with stock markets holding their ground as expectations for corporate profits continued to deteriorate sharply.
Companies listed on the STOXX 600 are expected to report a decline of over 50% and 37% in earnings for second and third quarters respectively, I/B/E/S data from Refinitiv showed.
Growth in year-on-year profits is not expected before the first quarter of 2021.
"Corporate profits will decline very significantly, around 35% globally," said Jean-Marie Mercadal, deputy chief executive officer at OFI Asset Management, adding that current valuations of stocks are not "cheap".
Looking forward, he said the "recovery pace could be moderate", given the time needed to completely reopen economies and because consumer spending would likely be hit by growing unemployment.
All major European indexes are expected to follow the trend of the pan-European STOXX 600: a slow and incomplete recovery from 2020 highs by the end of 2021.
Germany's trade-sensitive DAX index is expected to end next year at 12,213 points, well below its 13,795 February record.
The same pattern stands for France's CAC 40 seen at 5,350 points by the end of 2021 after it reached over 6,100 points in February.
London's FTSE 100 is also not expected to reclaim its 2020 high - 7,689.67 points - before the end of the 2021, where it is seen at 6,740 points.
(GRAPHIC: Stocks Poll 2 -
(Reporting by Julien Ponthus with Joice Alves, Thyagaraju Adinarayan in London and Stefano Rebaudo in Milan; Additional polling by Mumal Rathore, Khushboo Mittal and Sumanto Mondal in Bengaluru; Editing by Alison Williams)