World Stocks: Green shoots seen next year

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LONDON: World stock markets will recover next year from a nightmarish 2011 that has wiped trillions of dollars off share prices, according to a Reuters poll that showed almost all major stock indexes ending 2011 in the red.

Darkening economic prospects and fears the euro zone debt crisis will unravel into financial catastrophe sent global stocks plummeting around 14 percent since the last quarterly poll of equity strategists in June.
Only the Dow Jones Industrial Average and South Korea's KOSPI are expected to finish the year with gains compared with 2010's closing levels, among the 19 major stock indexes covered by Reuters polls over the last week.

Still, despite the dire performance of stock markets so far this year, most respondents were stuck in their usual habit of predicting big gains, no matter what real risks face the world economy.

According to the consensus, only one index -- Taiwan's TAIEX -- is expected to finish 2011 at a significantly lower level than its close on Thursday.

The last three months have seen an enormous spike in stock market volatility, to the point that several of the survey's usual sample of around 350 analysts refused to give forecasts this time.

While analysts are waiting for clear signs either way of progress or failure in fixing the euro zone debt crisis, stalling economic growth in major Western economies will restrain share prices in coming months.

"The global slowdown will still drive economic growth and earnings lower," said Philippe Gijsels, head of research at BNP Paribas Fortis in Brussels.

"Obstacles to a new bull market are still formidable... there is a lot of political uncertainty. This will take time to clear."

World equities have already lost around $3.7 trillion dollars in market capitalization since the start of this year -- more than the nominal gross domestic product of Germany.

Even by midway through next year, analysts expect only a handful of stock indexes -- seven out of 18 -- to top their closing 2010 levels. By comparison, world stocks rose around 30 percent in 2009 and around 10 percent last year. (Reuters)