Reuters/Paris


Eurozone shares are enjoying their best first-quarter performance in 17 years as global investors pour money back into the region on expectations the European Central Bank’s asset-buying scheme will spark a corporate profit renaissance.
The Euro STOXX index, including eurozone shares such as brewer Anheuser-Busch InBev and planemaker Airbus, is set for a gain of 18.8%, its biggest first-quarter rise since 1998.
The gain is even bigger for Germany’s DAX, up 22.4% and set to record its biggest first-quarter performance since its creation in mid-1988.
The rally in eurozone shares represents a rise of about €665bn ($712bn) in market value over the past three months, data from Thomson Reuters Datastream shows.
That is more than half the size of the ECB’s quantitative easing programme, launched this month.
The drop in the euro over the past few months has helped fuel appetite for European stocks, as investors bet the lower currency will revive corporate results after years of stagnating profits.
“What’s coming in the next six to 12 months is probably a wave of profit forecast upgrades for eurozone companies, thanks mostly to the impact from the lower currency,” said Romain Boscher, global head of equities management at Amundi, which has €850bn ($919bn) under management.
The euro is down about 20% against the dollar over the past year, lifting eurozone firms as roughly 50% of their earnings come from outside the region, while the stronger dollar is set to hurt US company results.
“The context is absolutely unprecedented,” said Catherine Garrigues, the head of European equities management at Allianz Global Investors France. “With the ECB’s quantitative easing set to run into 2016, this will continue to fuel the rally in European stocks.”
According to Bank of America Merrill Lynch Global Research data, European equity funds have attracted $46.6bn in net investment flows this year, while US-focused stock funds have seen net outflows of $44bn.
Among eurozone markets, Portugal’s PSI 20 index, one of the region’s smaller benchmarks, has risen 24.5% in the quarter, Italy’s MIB index has climbed 21.8% and France’s CAC 40 has gained 18.8%.
Spain’s IBEX has underperformed, up 12.2%, reined in by worries over Spanish companies’ strong exposure to Latin America, where economic growth is slowing.
Greece’s ATG stock benchmark bucked the trend, down 4.8% on the quarter as the election of the anti-austerity Syriza party prompted investors to cut their exposure to the country. Outside the eurozone, Britain’s FTSE 100 hit a record high during the quarter but is only up 4.1%. Switzerland’s SMI index is up 2.2%, still reeling from its plunge in January after the Swiss National Bank scrapped the franc ceiling in a surprise move.
European stocks’ performance so far this year is striking compared with Wall Street, where the S&P 500 is up 1.3%, the Dow Jones 0.9% and the Nasdaq 100 up 4.5%.