These stocks could deliver 40% returns by end-2016
Citi (NYSE: C) bank forecasts that European equities could deliver 40 percent returns by the end of next year, fueled by earnings per share (EPS) growth, plus macroeconomic expansion and higher liquidity.
"Our 40 percent 'grey sky' scenario for European equity returns to end-2016 is based on three key factors/forces: 1) QE-funded search for yield, 2) world-record yield/funding gap in Europe, 3) growth in Europe," said analysts led by Terence Sinclair, head of EMEA research at Citi, in a report on Monday.
Citi predicted that real gross domestic product ( GDP ) for the euro area would grow by 1.5 percent this year and 2.1 percent in 2016. Its 2015 prediction was in line with that of the International Monetary Fund, but the bank's 2016 expectations was more bullish.
Either way, the forecast mark progress on the 2014 figures of 0.9 percent growth.
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"Better economic growth and a weaker euro present upside risk potential to EPS," Citi said.
EPS growth of 10 percent or more was seen for 2015-2016, with Europe ex-U.K. one of two regions in the world where this was forecast (the other being Japan).
So far this year, the pan-European STOXX 600 (STOXX: .STOXX) index has gained 17 percent. It has appreciated by around 60 percent since European Central Bank President Mario Draghi famously said in July 2012 that he would do "whatever it takes" to preserve the euro (Exchange: EUR=).
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