European stocks plunged last week but were still able to remain on track to post their best monthly performance in over three years, lifted by high hopes that the European Central Bank’s quantitative easing programme will be revitalise the region’s economic growth and corporate earnings.
The FTSEurofirst 300 index of the top European shares totalled to a record gain of 7.1 % for January, it’s largest since October 2011. It has strongly outperformed Wall Street, where the S&P 500 has lost 2.3 % since the beginning of the year.
Predictions that the European earnings for the first time in three years will see some improvement in the region’s economic momentum for this year.
After four years of continued disappointing growth, analysts believe that Europe is on the verge of an upgrade cycle and this will be one of the dominating factors that would influence investment returns in Europe this year.
European net earnings revisions were in the negative territory since March 2011 and over the next 1-2 months will result to move into positive territory as analysts adjust their predictions for the substantial moves seen in FX, rates and the price of oil.
Global asset managers began to increase their exposure to European stocks by betting on a QE-driven rally and an improvement in corporate margins from a attenuated currency and lower energy costs.
During the past week, European equities were able to savour $5.1 billion worth of investment inflows, the largest weekly amount since December 20134, based on the data from Merrill Lynch Global Research. European stocks have enticed $7.2 billion in fresh money for this year alone.
There is a little pause ahead of the weekend, but there is no real selling pressure and basically, charts reveal that indexes are still within the bullish trend. With that said, people are simple more cautious with a couple of possible negative catalysts namely Russia and Greece, in which there is such a an impulsive feeling to book profits.
Banca Monte dei Paschi di Siena featured among the top losers which was down 8 % following a planned capital increase at the lender might pose a bigger than expected capital hike to approximately 3.5 billion euros ($4 billion), one billion euros more than the initially predicted figures.
At around Europe, Britain’s FTSE 100 index was down 0.3 %, Germany’s DAX index plummeted 0.2 % and France’s CAC 40 was off 0.4 % correspondingly.
Green banking shares outpaced some of the losses suffered last week after the election victory on anti-bailout party Syriza in addition to the new government’s cancellation of privatisation plans.
The Athens Stock exchange FTSE Banks Index surged 1.7 % and the Bank of Piraeus was up 2.9 % followed by Alpha Bank, which rose 5.9 %.
Still, the much broader Athens ATG benchmark equity index plummeted 0.8 %, which posted a loss of 13.7 % last week.