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European stock investors look for rebound next year

European stock indexes rounded off their worst quarter in at least three years amid falling profits and concern terrorist attacks in the US will delay a rebound in economic growth until next year.

Even though profits may get worse in coming months, some investors are buying stocks, betting that share prices have dropped too far given that falling interest rates will prompt a rebound in profit growth next year.

"Earnings will collapse in the next three months," said James Clunie, head of global equities at Aberdeen Asset Management, which oversees about US$4 billion. "Policy-makers in the US, Europe and Japan are cutting rates and pumping money into the economy. That means share prices are going to go up."

Benchmark indexes in the UK, Germany and France finished their best week in at least 13 years as companies including ING Groep NV, Zurich Financial Services AG and Credit Suisse Group jumped more than 25 percent after reaching two-year lows or more a week earlier.

Clunie was buying shares of Volvo AB before the terrorist attacks on Sept. 11. He kept buying as shares of the No. 2 truck maker dropped 16 percent in the following six sessions, on expectations tax cuts in the US and interest rate cuts around the world will help earnings growth recover next year.

The US Federal Reserve cut the overnight bank lending rate to an eight-year low of 3 percent on Sept. 17. The move was followed within 48 hours by rate cuts in Japan, the UK, Switzerland, Canada and by the European Central Bank.

Central banks have pumped cash into the money markets to ensure commercial banks don't run short of money, lending US$120 billion the day after the attacks. The US Congress is also mulling US$50 billion of extra government spending.
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