By Lucy Raitano

LONDON (Reuters) – European shares will hit all-time highs in 2024, a Reuters ballot discovered, because the prospect of rate of interest cuts, hopes for a gentle touchdown and powerful earnings momentum gas optimism.

Fund managers and fairness strategists surveyed Feb. 9-21 count on the pan-European benchmark index to succeed in 510 by year-end, surpassing 500 for the primary time. It could suggest a 3.7% enhance from Tuesday’s shut of 491.90 and a 6.5% acquire for 2024.

The closely-tracked index superior on Thursday to an all-time excessive, boosted by expertise shares after an unexpectedly upbeat income forecast from U.S. chipmaker Nvidia (NASDAQ:).

In the meantime, the Euro STOXX 50 index of the 50 largest and most liquid shares within the euro zone is seen rising to 4,800 by the tip of 2024, implying a 0.8% acquire from Tuesday’s shut, the survey median discovered.

In 2023, Europe’s STOXX 600 gained 12.7% and the Euro STOXX 50 over 19%, and thus far in 2024 have added a respective 2.7% and 5.3%. The rally was extremely concentrated within the final two months of 2023, as merchants pinned their hopes on an AI growth and peaking rates of interest as world inflation readings fell.

Cash market merchants are betting the European Central Financial institution will slash the bottom charge by over 100 foundation factors by year-end.. However such bets have been scaled again in latest weeks amid much less dovish feedback from central financial institution officers and strong information out of the U.S. and Europe.

“All the things facilities on the macro, and whether or not the central banks minimize charges as exhausting and as quick because the market has priced in,” mentioned Michael Area, European market strategist at Morningstar.

“There are many causes to suppose this would possibly not occur precisely because the market needs, which might result in disappointment, and potential volatility,” Area mentioned.

Slightly below 60% of respondents mentioned a correction of their native inventory market was “unlikely” over the approaching three months, whereas the remainder mentioned it was “doubtless”.

Marco Vailati, head of analysis and investments at Cassa Lombarda in Milan, mentioned a correction is probably going on account of “some profit-taking and a actuality examine of the exaggerated expectations of financial coverage lodging.”

Others mentioned a correction is unlikely provided that rate of interest cuts will assist shares, additionally citing European valuations’ relative cheapness in comparison with their U.S. counterparts.

“Optimistic impulses are anticipated from rate of interest cuts by the European Central Financial institution, in addition to from stimuli that China’s authorities might implement for its economic system,” mentioned Jochen Stanzl, chief market analyst for CMC Markets (LON:) in Germany.

On Tuesday, China introduced its largest ever discount within the benchmark mortgage charge as authorities sought to prop up the struggling property market and broader economic system.

Polling confirmed is predicted to rise 2.5% by end-2024 from Tuesday’s shut of 17,068.43. It’s at the moment buying and selling at report highs.

The same rise of two.3% is forecast for 100, whereas 40 is seen including 2.0% by the tip of the yr.

A 71% majority of these polled count on company earnings to extend of their native markets over the subsequent six months, whereas 29% anticipate a lower.

“Because the begin of the yr, estimates of earnings per share in 2024 have been revised decrease, whereas we now have moved from a “exhausting” to a “gentle” to a “no-landing” world narrative,” mentioned Ankit Gheedia, head of Europe fairness & derivatives technique at BNP Paribas (OTC:).

This has narrowed the hole between analyst expectations and BNP’s mannequin earnings forecast, Gheedia mentioned, and because of this doesn’t suppose earnings might be a draw back danger for European equities within the close to time period, barring adversarial shocks.

(Different tales from the Reuters Q1 world inventory markets ballot bundle:)