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Europe Hope Takes Stocks to Bull Territory

Posted by: David Tweed on February 9, 2012

It’s all about equities. On the day that BlackRock CEO Larry Fink told Bloomberg TV that investors should be 100% in stocks, the MSCI All-Country World Index touched bull market territory, signified by an increase of 20 percent since last year’s Oct. 4 low.

Fink says concern over Greek politicians squabbling about the conditions needing to be met to unlock a second bailout are just “noise” and that a deal “will be worked out.”

That’s pretty much the view of Bob Parker, a senior adviser to Credit Suisse Asset Management (CS), who predicts a two-year equity market rally starting in the second half of this year. “It’s dangerous to be short global equity markets,” he told Linzie Janis and Owen Thomas on Feb. 8. “Are equity markets going to be higher at the end of the year? The answer is: decisively yes.”

Parker is optimistic for three reasons: the risk of U.S. recession is “gone,” he says; China’s economy is headed for moderate slowdown and nothing more severe; and the risk of a euro zone breakup has been reduced thanks to the European Central Bank’s infusion of liquidity into the banks via its three-year loans.

Guy Spier, chief executive of Aquamarine Capital Management, also sees equities rising as corporate earnings growth accelerates and European policy makers make slow but steady progress resolving the debt crisis.

“I don’t think the debt crisis has been handled with the greatest of efficiency, but Europe is muddling through,” Spier says. “I think that many actors, including myself, are recognizing that the powers that be will hold the euro together.”

Both Spier and Parker forecast a mild euro zone recession this year, with Parker looking for a contraction of 0.2% to 0.3%.

That view tallies with some economists. Greg Fuzesi at JPMorgan (JPM) last month raised his first-quarter euro zone forecast to zero from an annualized contraction of 1.5%, after January’s improvement to the Purchasing Managers’ Indexes for services and manufacturing.

Sure, there are plenty of people like Jamie Dannhauser at Lombard Street Research who say getting excited about the PMIs seems a little premature, but my sense is that we are at a turning point as others like Erik Nielsen at UniCredit (UCG:IM) predict forecasts for the euro zone to be revised higher on the back of better data, including three improvements in German business confidence in a row and improving Italian PMIs.

Carsten Brzeski at ING is another optimist. Check out his report, “Swan song for the recession? Four reasons for a quick rebound of the German economy.”

And one more voice: James Nixon, chief European economist at Societe Generale: “People have not really anticipated the scale of the ECB’s actions. We’ve seen the ECB expanding its balance sheet by 730 billion euros since the second week of August last year and that’s a display of unbridled central bank authority and yes that is a form of QE and a lot of that will end up in the equity markets.”

See that interview on Bloomberg TV today.

Photograph by Hannelore Foerster/Bloomberg

Reader Comments

Firozali A.Mulla

February 9, 2012 4:30 PM

Cloud NO 9,In an article called “They Say” in the Readers Digest” the moral was, there is no one but it is a spread of rumour, You cannot pinpoint any, it is they, a rumour mongering. Greece has reached a tentative agreement on new austerity cuts demanded by creditors to release a euro130 billion ($173 billion) bailout, hours before a crucial meeting of finance ministers in Brussels, Prime Minister Lucas Papademos' office said Thursday. A spokeswoman said the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected early Thursday during a marathon meeting of the three coalition party leaders. No details were available on what alternative measures would be chosen. The spokeswoman spoke on customary condition of anonymity. Well this is. It may be true but I would read this with skepticism. If it true, I am happy. "Even with the growth of comparative privacy, life remained much more communal and exposed than today. Toilets often had multiple seats, for ease of conversation, and paintings regularly showed couples in bed or bath in an attitude of casual friskiness while attendants waited on them and their friends sat amiably nearby, playing cards or conversing but comfortably within sight and earshot." I thank you Firoza

Firozali A.Mulla DBA

February 20, 2012 4:53 PM

Babies Know What's Fair, “That's not fair!" It's a common playground complaint. But how early do children acquire this sense of fairness? Before they're 2, says a new study. "We found that 19- and 21-month-old infants have a general expectation of fairness, and they can apply it appropriately to different situations," says University of Illinois psychology graduate student Stephanie Sloane, Monday, 20 February 2012 Today I see the true picture of the humans’ life not just in Tanzania that is rampant with corruption but elsewhere where in the elite countries. Immigrants trickling back to. All despite crackdown, all look like they have no place despite staying in one country for years. This is sad but then who wants to know this? UN. G20, G8, The Economic Forum, where people get crushed under one another? Paris Club? This is from the TV and news. Ana Jimenez and her husband were so terrified of being sent back to their native Mexico when Alabama's tough crackdown on illegal immigrants took effect that they fled more than 2,000 miles to Los Angeles, cramming into a two-bedroom apartment with more than 20 other relatives. Now they are among the families coming back to cities like Birmingham, as the mass deportations never materialized and courts blocked parts of the law. No one knows how many people initially left the state, so it's impossible to say how many have returned. But some illegal immigrants are trickling back, unable to find work elsewhere and missing the place that had been home for years. "I don't know that he has a passion for the middle class, or the environment, or whatever it is. He has a passion for winning and a passion for putting together the operation to do so." STEVE ELMENDORF, a Democratic lobbyist, on David Plouffe, a senior adviser to President Obama. I thank you Firozali A. Mullla DBA without malice.

Firozali A.Mullar

March 7, 2012 7:17 AM

After SUPER Tuesday all will change. It is impossible to live pleasurably without living prudently, honorably, and justly; or to live prudently, honorably, and justly, without living pleasurably. -Epicurus, philosopher (c. 341-270 BCE) I thank you Firozali A.Mulla DBA

Firozali A.Mullar

March 10, 2012 8:28 PM

Not that easy sirs. Read on Kofi Annan goes to Syria in the midst of war and there you are the whole world gets all sorts of noise for and to of. AS is he is the old timer, we need new thinkers. After all what will Kofi do there? He is not wanted and is trespassing. With h=these comments we want peace in the Middle East. It is the case with Russia. I have no idea as I was not there but the TV and net keep on talking about how share were sold in the black for double counting. What this is I know not and to be honest am not interested as we have enough in our hands for years. With the farce wars, we have not only gone broke but looted others and make their lives a misery. Are these economics, politics, and leadership? Syria's President Bashar al Assad has told visiting UN-Arab League envoy Kofi Annan that "terrorist groups" are stopping a political solution to end the violence in the country. The Arab spring a beautiful name, has gone down the tube. Why? Do they have problem? Yes the Iran issue. Any time, a bluff, a nuke will be released by one and destroy all of us. Enough said, please help to say, have we hade the most covered for the day. I thank you Firozali A.Mulla DBA

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Financial markets are on the edge as investors await a solution to the European debt crisis. This blog examines the banks that hold billions of euros worth of Greek, Italian, and other sovereign debt; the governments that must pay off or refinance that debt; and the implications for the worldwide financial system if they can't.

Analyses or commentary in this blog are the views of the author and or commentators, and do not necessarily reflect the views of Bloomberg News.

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