Tightening financial conditions and the prospect of an economic recession are going to be a toxic brew for European shares going into 2023 with a key regional benchmark seen sliding towards October lows, a Reuters poll has found.
equity benchmark to reach 408 points by mid of next year, a near 8% drop from Friday's close.
"The impact of aggressive rate hikes will be felt on the real economy and hence earnings growths in the next few quarters. Based on our economists, we expect a shallow recession in Europe which leads to forecast an earnings decline of 12%" next year, said Barclays strategist Emmanuel Cau in London.The index could recover in the second half, aided by expectations of peaking rates and reach 434 points by end-2023, down 1.
"Things could change, for example, if the inflation outlook were to start improving significantly or if at least a ceasefire is achieved in Ukraine." "The economic outlook looks challenging as our economists forecast a recession in the euro zone," said Marc Haefliger, Head of Global Equity Strategy at Credit Suisse in Zurich.
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