Bloomberg News

German, French, Italian Stocks May Increase 10%, Natixis Says

October 28, 2011

Oct. 28 (Bloomberg) -- Germany’s benchmark DAX Index, France’s CAC 40 and Italy’s FTSE MIB may gain 10 percent by the end of the year as the region’s sovereign debt crisis eases, according to Natixis.

“We’re positive in Europe short term, not because the economy is good, but because Europe suffered more than other regions from the political problems,” Benoit Peloille, equity- market strategist at Natixis in Paris, said in an interview yesterday. “Not having an agreement among leaders weighed heavily.”

The CAC 40 dropped 11 percent this year through yesterday, the DAX slid 8.3 percent and the FTSE MIB sank 16 percent as policy makers struggled to find a solution to save Greece from default and stop the crisis from spreading across the region.

The three gauges jumped more than 5 percent yesterday as European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the region’s rescue fund, responding to global pressure to step up the fight against the fiscal crisis. The Oct. 26 euro-area summit ended with an agreement to increase the European Financial Stability Facility to about 1 trillion euros ($1.4 trillion), leveraging existing guarantees by as much as five times.

Germany, France and Italy, the biggest contributors to the EFSF, have the most potential to rebound, Peloille said. Banks, insurers and industries most linked to the availability of credit, such as commodity, construction and automobile companies may gain, he said.

U.S. Stocks

After the three national benchmarks climb 10 percent, U.S. stocks may become more attractive as they benefit from improving economic data, according to Peloille.

The U.S. economy grew in the third quarter at the fastest pace in a year as gains in consumer spending and business investment helped support a recovery on the brink of faltering, a report showed yesterday. Gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate, matching the median forecast of economists surveyed by Bloomberg News and up from a 1.3 percent gain in the prior quarter, Commerce Department figures showed yesterday.

“What’s interesting in the U.S. is the economic statistics have been good,” Peloille said. “They don’t validate the scenario of a recession, yet the market is pricing in a recession.”

--Editors: Andrew Rummer, Will Hadfield

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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