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European stock market 2016: Predictions for European economy 2016

European Stock Market 2016

The outgoing year was characterized by the fact that the experts gave very cautious forecasts, as in the unpredictable global political environment, difficult economic conditions and in highly volatile markets, it seemed really challenging.

The Forbes experts, in turn, believe that the dynamics of the world economy will be comparable with previous years. European countries will show a little better results, Asian – slightly worse. The grimmest seem the prospects of the economies, which depend on the extraction of natural resources.

The growth of European economy 2016 will be about 1.9% of GDP, which, given the weak population growth is decent. However, it cannot be called a boom.

For European stock market 2016 the main shock will be the UK decision about leaving the EU. The referendum is scheduled for autumn. At this moment, while the people’s discontent about migration flow rises, therefore, a high probability that the result of the vote will become the country's withdrawal from the Union. This is seen as a political risk and a threat to the stability of the national currency and stock indices, for at least a month before the vote. We have seen what a sensation produced the results of "Scottish referendum', so by "the European referendum" one can expect no less turmoil.

European Economy

European stock market 2016 also will be largely affected by the settlement of the European Central Bank. In the second half of 2015, the ECB left the refinancing rate at level of 0.05%. This may affect the continued functioning of the program of monetary stimulus carried out by the ECB. This program, being the so-called "quantitative easing policy", implies that the European Bank until the fall of 2016 has plans to purchase government, mortgage and other secured liquid assets of bonds in an amount equal to 1.1 trillion Euros.

The inflation is the most significant risk of this policy.

In addition, inflation in the EU will be affected by a slowdown in the economies of the PRC and the leading developing countries both with the fall in the prices of basic commodities. It’s important to say, that the latter is a great threat to the economy.

Experts of the Societe Generale SA (SocGen) downgraded their forecasts for the European stock market 2016 because of concerns regarding global economic growth.

For the Euro Stoxx 50 forecast for the end of this year deteriorated to 3000 points from 4000 points.

Level in 3000 points is only 4.3% higher than the value of the index at the close of the market on the 25 of February.

The forecast of the Bank analysts predicts that the Stoxx Europe 600 index at the end of 2016 will amount to 340 points, which is 4.1% higher than on Thursday.

Another certain destabilizing factor in the European economy 2016 is going to be the migration issue. Against the background of Germany statements that in the coming year, the country is ready to accept an additional 800 thousand people and to allocate up to 17 billion Euros allows predicting complications that will be caused by it. Such cash amounts are significant even for Germany. But not all countries have the ability to allocate comparable funds to refugees; also not everyone is ready to accept migrants that we managed to watch this summer at the example of Hungary.

 

By Chieffinancing 25.07.2016

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