European Stocks May Rally 17% in 2010, JPMorgan Says

By Roger Neill and Adam Haigh

Dec. 7 (Bloomberg) -- European stocks may rally 17 percent by the end of 2010 amid earnings growth and an improvement in economic leading indicators, according to JPMorgan Chase & Co. strategists.

“The near term catalysts are a strong earnings reporting season, positive payrolls, rebound in leading indicators and increasing risk allocation in new year,” Mislav Matejka, London-based head of European equity strategy wrote in a report dated today.

The MSCI Europe Index may reach 1,300 by the end of next year, 17 percent higher than its close on Dec. 4. The U.K.’s benchmark FTSE 100 Index could climb to 6,150 by the end of 2010, a 16 percent increase from its last close.

The European gauge has surged 56 percent from its March 9 low as governments committed about $12 trillion and central banks cut interest rates to record lows to end the first global recession since World War II and revive credit markets. Matejka said this is “producing the desired effect” by driving a reflation of asset prices, according to the note.

Goldman Sachs Group Inc. said Dec. 2 the regional Dow Jones Stoxx 600 Index will rise to 300 by the end of 2010. Deutsche Bank lifted its projection to 250 from 225 on Dec. 1 and ING Groep NV raised its 2010 estimate for the gauge to 310 from 260 and set a target of 380 for 2011, according to a report dated Dec. 1. The gauge closed at 249.03 on Dec. 4.

To contact the reporter responsible for this story: Adam Haigh in London at ahaigh1@bloomberg.net