European stock markets have been a good day yesterday. The Stoxx 600 index has advanced 1.39, to 248,82 points, ending in the green for the fourth straight session. The CAC 40 took 1.59, driven by oil companies. However, markets slowed their progress in the afternoon, while Wall Street was hesitant. "The market is very nervous waiting for the monthly employment figures: a good statistics could provide the impetus", underlines Thierry Guille, Director General of the Raymond James broker.
Investors had to "Digest" a series of mixed statistics (the firm ADP, ISM services figures, industrial orders). While the us may employment figures - released today - all the spirits, the words of Ben Bernanke are not really reassuring: the pattern of the US Federal Reserve (Fed) said yesterday that he was "particularly" worried about unemployment. The President of the Atlanta Fed said, him, that the Central Bank might raise rates while unemployment remained high. "What can be badly perceived by the markets," notes Pierre sabatier in PrimeView.
Psychological effects
Most importantly, this rebound of markets is catastrophic sessions in recent weeks: between April 15 and may 25, the Parisian flagship index, for example, plunged 18! "The market is caught between two fires: on the one hand, good news on the recovery of the US and world economy and, on the other, risks in the euro area.". The short term, the battle should continue. Scholarships obey more what psychological effects to the fundamental, says Jean Danjou, Oddo securities. Longer term - on the next few months - markets should resume an upward trend, on bottom of attractive valuation.
The low valuation is often put forward to justify the potential progression of the stock markets. Stoxx 600 is treats 11.3 times profits 2010 and 9.5 2011 profits, according to data from PrimeView. The index is at its lowest since early 2009 and below its historical average (13.5 on twenty years). In 2008, at the height of the crisis, the price-earnings (called PER) ratio descended below 9. Sectoral disparities are strong: insurance have low multiples, banks are also low "because of the lack of visibility on the regulations, said Pierre Sabatier." Health is below its normal value, which is an anomaly. . Same observation for the CAC 40, which displays a multiple 10.8, also below the long-term average.
In the United States, the S & P 500 index "is worth" 13.5 times the profits expected in 2010 and 11.5 times those expected in 2011, there also, below the trend (14.5). "It is a fact: markets are not expensive, but it is not so that they can return to their long-term multiple." "With uncertainties that dangle the markets, the standard is probably called to change", resumed Pierre Sabatier. Strong recent retreat of the awards reflects he fears of investors about the prospects for profits increase, while the austerity plans could hinder economic growth. Analysts expect to increase the profits of 37 in 2010, and then from 19.5 in 2011 in Europe and by 33.4 and 17.4 respectively in the United States. "Estimates are probably too high for next year: we expect to downward revisions", still note Pierre Sabatier.
Similar finding for Nick Nelson, UBS strategist: in view of the historical average, the European market would currently a decrease of 20 of profits next year! Such a drop would be in a context of "double-dip", even if this scenario is ruled out by the Bank. UBS table on profit growth of 10 in 2011 in Europe.
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