European companies are reporting the biggest profit rise in six years as the region's economic expansion overcomes the sovereign debt crisis , making stock strategists almost twice as bullish as their US counter-parts.
While Portugal became the third euro member to seek a bailout from the European Union, the benchmark Stoxx Europe 600 Index rose 0.6% last week, extending its two-year rally to 78%. The region's single currency posted its biggest first-quarter gain on record. Yields on Spanish and Italian bonds are falling compared with German bunds, a signal investors don't expect the debt debacle to spread. Equity valuations are near two-year lows.
Earnings for Stoxx 600 companies may rise 20% in 2011, led by exporters from Bayerische Motoren Werke AG to Cie de Saint-Gobain, according to data compiled by Bloomberg. The increase would bring the two-year gain to 93%, the most since 2005, leading 11 strategists tracked by Bloomberg to predict an 8.1% rise in benchmark indexes. US forecasts show the Standard & Poor's 500 Index will gain 5.3%. "Profits are there and this shows us the economy is in good health," Alain Bokobza, the Paris-based head of asset allocation strategy at Societe Generale, which manages $300 billion, said in a phone interview from New York.
For more: Europe twice as bullish as US as net rises 20% - The Economic Times
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