Global stock markets expected to rally in 2015 on more cheap cash: Reuters poll

[NEW YORK] Global stock markets are expected to rally next year as central banks in Asia and Europe flood markets with fresh liquidity just as others begin tightening, Reuters polls showed on Wednesday.

Accommodative monetary policy drove a bull market in stocks in recent years, and as China, Japan and the eurozone struggle with disinflation and weak growth more cash is expected to flow into investors' pockets.

The poll of around 250 analysts from across the world showed all 17 stock indexes surveyed are expected to rise from now to the end of next year. And only one of them - Canada - is forecast to gain less than 10 per cent.

"The sharp drop in oil prices reinforces the scenario of global growth above 3 per cent in 2015 while central banks will continue to flood the market with liquidity: two positive factors for stocks," said Eric Mijot, head of strategy at Amundi, which has $1.06 trillion in assets under management.

Crude oil prices have plunged 50 per cent since June, sending global inflation tumbling.

Deepening concern those plunging oil prices may send the eurozone into a deflationary spiral will push the ECB to buy sovereign debt early next year, a Reuters poll found last week.

Stocks across the region - and the euro itself - have taken a beating, but those shares are forecast to rally next year.

"After a 'lost' year in terms of stock market performance, we see the Euro STOXX 50 delivering a good showing in 2015, as structural reforms, monetary policy change, investment plans and a weaker currency finally start to pay off," said Roland Kaloyan, head of European equity strategy, at Societe Generale.

Faced with more modest growth in China, the People's Bank of China will cut interest rates again by March, two-thirds of the economists in a separate Reuters poll said. That is likely to boost Shanghai's Composite Index more than 12 per cent by the end of next year.

Despite that slowdown in the world's second-biggest economy, Chinese stocks have soared more than 40 per cent this year, even as their regional peers, bar India, missed the bull run.

Government reforms in Brazil and India, opening up markets and attracting more foreign investors, are expected to propel their stocks higher next year.

But while some governments adopt accommodative plans and their central banks loosen policy, the U.S. Federal Reserve and Bank of England are expected to begin raising interest rates next year.

Since that can happen only if their economies are on a firm footing, U.S. and British stocks are forecast to gain more than 10 per cent next year.

However, weak data from China and low inflation have cast some doubt over the timing of any interest rate increases. "Just because we're (the US) doing better and our consumer is getting stronger, that doesn't mean things are going to get better abroad. I'm concerned about overseas markets, and the big things that could derail us are coming from abroad," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.

As in nearly all stock market polls conducted by Reuters, analysts as a group were again optimistic about what lies ahead for equities. However, they cannot predict - or factor in - shocks that rock valuations.

The year-end forecast for Britain's FTSE 100 index has on average been 8 per cent higher than the market's actual close since 1997. For Germany's DAX, it has been 12 per cent higher, a study of Reuters survey results showed.

The DAX is forecast to rise above a record high reached earlier this month to reach 10,800 points by end-2015, up almost 13 per cent from Tuesday's close. France's CAC is expected to reach 4,700 points by end-2015, almost 15 per cent higher than Tuesday's close.

Similarly, despite uncertainty over the outcome of Britain's national election in May, the FTSE 100 equity index is still tipped to reach a record high by the end of 2015, soaring to 7,000 points.

Steve Ruffley, chief market strategist at InterTrader, said the FTSE would still benefit as record-low interest rates hit returns on bonds and cash, driving investors to the better returns available from the stock market.

Disinflation risks, aggravated by the slump in oil prices, will keep major sovereign bond yields from rising significantly, a Reuters poll forecast last week. "All in all, the FTSE goes higher as there is nowhere better to put your money for relative safety," Mr Ruffley said.

REUTERS