European stocks to rise but unlikely to regain 2015 peaks

European stocks are expected to rise in 2016, helped by stimulus measures from the European Central Bank, although markets are unlikely to get back to this year's highs, a Reuters poll found. The Reuters poll of over 30 traders, fund managers and strategists gave a median forecast for the pan-European STOXX 600 index to reach 388 points by the middle of 2016, and 404 points by the end of next year.
It also forecast the euro zone's bluechip Euro STOXX 50 index to rise to 3,500 points by the middle of 2016 and 3,675 points by the end of 2016. Germany's DAX was seen at 11,400 points by mid-2016 and 11,900 points by the end of next year. This would represent gains of roughly 10 percent from current levels for those key indexes by the middle of 2016. However, this would also leave European markets below peak levels reached earlier this year after some stunning climbs in the first quarter. In April the STOXX600 peaked at 415.18 and the DAX at 12,390.75.
Traders and fund managers said concerns about the impact of a likely US interest rate rise and worries about declining commodity prices could cause choppy market conditions next year. "2016 will start with a positive momentum in GDP growth and company earnings growth, benefiting from tailwinds provided by the soft euro and a persistently low oil price. But this positive impact will then gradually weaken over the course of the year," said UniCredit equity strategist Christian Stocker.
Among forecasts from leading investment banks, Goldman Sachs saw the STOXX 600 ending 2016 at 400 points while Citigroup had a 440 points end-2016 target. Traders and economists expected the ECB to stick with its monetary policy easing measures, which should prop up European stocks while US shares could come under pressure from higher interest rates in the United States.
Nevertheless, lingering worries over China - where signs of a slowdown have knocked equities and commodity prices - and the pace of an economic recovery in the euro zone were likely to result in another volatile year. "I do not believe that the bottom is about to fall out of the market, but equally I foresee another difficult year ahead, with very choppy conditions throughout the year," said Hantec Markets' analyst Richard Perry.