stock market today - Stoxx Europe 600 index Forecast 2013 : European stocks enjoyed a good year in 2012, with the Stoxx Europe 600 rising 14% through Friday. They could continue their rise in 2013. While the region's economy will limp through 2013, with negative growth in the first half at best, European companies could get a helping hand next year from global growth of 3% to 3.5%. The fortunes of European companies are more closely correlated to global growth than those of rivals in the U.S. and Asia.
That said, the looming fiscal cliff could hurt near-term prospects in the U.S., and the fallout would have damaging implications for Europe. European policy makers will be happy that the incendiary situation in Washington distracts from problems on the Continent, but Europe needs a speedy resolution to the crisis just as much as Wall Street.
At home, there are more reasons for optimism. Political risk has diminished since the summer, yet sentiment remains weak and valuations are attractive. According to a survey of forecasts from eight market strategists, European equities could gain 9.2% in 2013. Predictions for the Stoxx Europe 600 index range from a rise of 12.5% to a drop of 1.3%. Some of the forecasts were compiled in late November and the index has tacked on 2% since then.
That momentum is symptomatic of the second-half performance in 2012, which has propelled the Stoxx 600 up this year. The gain far exceeds analysts' projections 12 months ago for a gain of at least 8.6%.
In spite of the worries about the European economy, which is expected to shrink 0.1% or 0.2% in the first six months of 2013, there is a silver lining of sorts: either recession in Europe or a bailout for Spain can weaken the value of the euro against the dollar and other major currencies, giving a boost to European companies that generate revenue outside the euro zone.
A majority of those strategists that offered forecasts for the euro reckon it will fall to a level between $1.15 and $1.20 by the end of next year. The common currency has defied expectations in 2012, remaining stubbornly resilient at a level around $1.30. It traded Friday at $1.3216, having gained 2.1% against the greenback this year.
Cyclical stocks like consumer discretionary suppliers and industrials can be winners in 2013. Two potential success stories are fashion retailer Next (ticker: NXT.United Kingdom) and engineering giant Siemens (SI).
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