European shares at seven-year highs

The FTSEurofirst 300 index of top European shares has surged 14% this year

European shares held steady at seven-year highs yesterday as investor confidence stayed buoyant ahead of the European Central Bank’s monthly €60-billion (Dh246 billion) moneyprinting programme set to start in March.

The FTSEurofirst 300 index of top European shares has surged 14 per cent this year, its strongest start to the year since regional stock market benchmarks were created in 1986.

“The market’s had a good run and it’s the end of the month so we’re going to see it drift lower today as people book some profit,” ETX Capital’s head of trading, Joe Rundle, said.

Investors have bought more higher-yielding assets, such as equities, as yields on core European government bonds have tumbled into or close to negative territory on the prospect of the ECB’s quantitative easing programme.

“The rally in stocks is so strong that we could see a capitulation of the shorts at some point, which would push the market even higher. Clearly some indexes have reached frothy valuation levels, but we’re still long in the short term,” said Mirabaud Securities senior equity sales trader John Plassard.

The FTSEurofirst

index was little changed at 1,557.90 points after hitting a fresh seven-year peak of 1,558.01, with support from strong Airbus result, the world’s No. 2 aerospace company, and despite weaker Asian and US markets.

Earnings season

About two-thirds of the way into Europe’s earnings season, 55 per cent of companies have met or beaten profit forecasts.

Overall, fourth-quarter earnings are expected to grow by 19.5 per cent, according to Thomson Reuters I/B/E/S, which would be Europe’s best season in 3-1/2 years.

The ECB is expected to give details at its meeting this week on its January 22 decision to embark on a securities buying programme to fend off deflation and revive Europe’s economy.

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