European shares scaled new five-year highs yesterday, led by gains for several major Swiss stocks after a fresh fall on the Swiss franc that should continue to buoy the country’s exporters.
It’s tough to go against the flow of money coming from the central banks
UBS technical analysts said European equity markets may retreat by June, but the majority of traders and investors felt any such pull-back would be short-lived and that European stock markets should continue to rise over the course of 2013.
The pan-European FTSEurofirst 300 index closed up 0.7 per cent at 1,245.66 points, its highest level since mid-2008, while the euro zone’s blue-chip Euro STOXX 50 index also rose 0.5 per cent to 2,809.58 points.
The Swiss SMI index rose 1.5 per cent to outperform other European markets, with gains at pharmaceutical groups Novartis and Roche, and food company Nestle adding the most points to the FTSEurofirst 300. Clarinvest fund manager Ion-Marc Valahu said Swiss companies were benefiting from a fresh fall in the Swiss franc against the euro and US dollar, which would continue to help the country’s companies export products.
He added it was difficult to justify bets on a broad-market fall in the current environment, due to rate cuts and injections of liquidity by world central banks that have hit returns on bonds and caused investors to move money over to equities.
“It’s tough to go against the flow of money coming from the central banks,” he said.
The STOXX Europe 600 Oil and Gas Index underperformed with a 0.4 percent fall, as a probe into the industry’s pricing of oil impacted companies such as Statoil and Royal Dutch Shell, among others.
UBS’ technical analysts said any further gains on European equity markets could be limited in the near-term, after a strong first half of 2013 that has seen the FTSEurofirst 300 rise 10 per cent since the start of the year.
However, McLaren Securities managing director Terry Torrison said any pull-back would be a minor one, since the fact that equities were offering better returns than bonds would continue to prop up stock markets.
“Any correction will be very short-lived and very small. It is definitely not a case of ‘sell in May and go away’.”