European stocks advanced for a second week as investors speculated that corporate profits and improving macroeconomic data will overcome the region’s sovereign-debt crisis.
The benchmark STOXX Europe 600 Index gained 1.9 percent this week, extending a 1.6 percent advance last week. It’s the first five-day up week since June for the European benchmark. The gauge has rallied 8.8 percent this year as corporate profits climbed, the Federal Reserve unveiled a US$600 billion bond-purchase program to assist the US economic recovery and the EU bailed out Greece and Ireland.
“In the mid-term it makes sense to be invested in equities, especially European ones,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments KGmbH, which oversees about US$221 billion globally. “The valuation of the market is reasonable. We should see positive returns in 2011, but volatility will remain.”
European equities will climb 12 percent through the end of next year as rising earnings and record-low interest rates help companies overcome the -sovereign-debt crisis, a Bloomberg survey of 13 strategists shows.
Goldman Sachs Group Inc, the most bullish forecaster, says the STOXX 600 will rally 20 percent because profits may expand twice as fast as the 14 percent average rate in more than 26,000 analyst estimates compiled by Bloomberg.
In the UK, a report showed manufacturing expanded in October twice as much as economists forecast, a sign that the economic recovery maintained its momentum into the final quarter of the year.
In Germany, Europe’s largest economy, industrial production rose almost three times as much as economists forecast in October, led by demand for investment goods such as machinery.