Analysts predict growth slowdown…

The performance of European and US stock markets will slow in 2007 to just half this year's levels, according to a poll of equity strategists by Financial News. The FTSE 100 will rise by just 5.8%, compared with 11.2% so far this year, and the DJ EuroStoxx 50 will climb just 7.6%, according to an average of nine forecasts from investment banks. A survey by financial magazine Barron's of nine strategists in the US predicted growth of just 6.6% for the S&P 500 next year, compared with 14.2% this year, and earnings per share growth in the US of 5.8%. Several analysts warned another correction was possible in the early part of next year. Peter Oppenheimer, a strategist at Goldman Sachs, said the risk of a short-term setback was growing because European equities have risen 19% from their lows in June. He said: "Although we see evidence of market complacency over macro conditions, we would view any setback as a short-term correction in an ongoing bull market." Nick Nelson, a strategist at UBS, said: "European equities are supported by attractive valuations and continued M&A and private equity activity. But near-term the market looks stretched on technical indicators and we may see some consolidation." Bear Stearns was the most optimistic of the banks surveyed, predicting a FTSE 100 value of 6900 by the end of next year. JP Morgan strategist Mislav Matejka is the only one of those polled to forecast a fall in European markets next year. He targeted 5850 on the FTSE 100 index, down 6.7%. He said: "Next year will be characterised by worsening growth rates, with economic growth decelerating in almost all regions, and we expect most big banks to raise interest rates." Some fund managers have proved more bearish than the investment banks. Rob Arnott of Research Affiliates, manager of Pimco's $12bn all asset fund, forecast stocks will fall next year thanks to slowing economic growth. He said 2007 had a "better than 50%" chance of being a bear year.