More modest year for global stock markets; Europe to lead: poll

Mon Dec 14, 2015 10:15am EST
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By Rahul Karunakar

BENGALURU (Reuters) - Stock markets in developed economies are expected to continue outperforming emerging markets next year, but optimism among hundreds of market strategists polled by Reuters in the past week has faded compared with just a few months ago.

Global stocks have broadly been rallying for several years, jacked up on rock-bottom interest rates since the financial crisis and on trillions of dollars worth of stimulus through bond purchases by some of the world's biggest central banks.

While that era hasn't come to an end yet - the European Central Bank and the Bank of Japan are well-entrenched in their asset purchases - there is a sense that while the hope for returns from such policy remains, its effect is diminishing.

European stocks are forecast to perform best in the coming year. But that optimism may hinge too much on the expectation that the ECB will soon ramp up its 60 billion euros of monthly bond purchases, an idea that met stiff opposition within the Governing Council at its policy meeting earlier this month.

Since August, financial markets have gone through wild gyrations, driven by concerns over global growth and jitters ahead of a now widely-expected U.S. Federal Reserve rate hike later this week, after several delays this year.

Strategists at Morgan Stanley say the global growth outlook likely will improve, but very slowly, giving them reason to be cautious.

"Lower growth means subdued corporate earnings; and continued U.S. dollar strength will likely prove a headwind for equities and emerging market assets," they wrote in their most recent global strategy note.

Crashing crude oil prices have also been acting as a drag on global markets, with investors still fretting over the broad weakness in commodities and whether it is more a story of excess supply or signals an even more worrying weakness in demand.   Continued...

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange March 18, 2013.  REUTERS/Remote/Janine Eggert