European stocks rose for a second week, with the benchmark Dow Jones STOXX 600 Index heading for its largest annual increase in a decade, amid signs the global economy is recovering.
Royal Dutch Shell PLC and Total SA led gains among oil producers as crude advanced after stockpiles of the commodity fell more than expected. Allied Irish Banks PLC rallied after saying it is looking at ways to raise capital next year. The STOXX 600 gained 2.3 percent this week to 251.9, extending its 27 percent rally this year. Most equity markets across Europe were closed on Thursday and all were closed on Friday for Christmas vacation.
A 59 percent surge on the regional benchmark gauge from March has been spurred by record-low interest rates in the US and Europe and by governments worldwide that have committed about US$12 trillion to revive credit markets and stimulate economic growth. Sales of existing homes in the US topped forecasts on Tuesday, the latest sign the world’s largest economy is emerging from recession.
“Markets still look to be reasonably good value and we expect profits are going to grow pretty quickly next year,” said Kevin Gardiner, the London-based head of investment strategy at Barclays Wealth, in a Bloomberg Television interview.
Earnings for companies in the STOXX 600 are expected to climb 29 percent next year, according to data compiled by Bloomberg. That compares with a forecast for a 7.4 percent increase in profits this year.
European equity strategists said earnings growth can push stocks 11 percent higher next year following this year’s rally, according to a survey on Tuesday.
Goldman Sachs Group Inc and Bank of America Corp, which underestimated the strength of this year’s gains, predict shares in the region may climb more than 20 percent over the next 12 months. Morgan Stanley is the only brokerage among 16 surveyed by Bloomberg to estimate a retreat by year-end, saying the withdrawal of government stimulus will weigh on equities.
The UK’s FTSE 100 climbed 4 percent this week, while France’s CAC 40 rose 3.1 percent. Germany’s DAX gained 2.2 percent as Infineon Technologies AG surged on a revised sales estimate.
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