The war in Ukraine triggered a sharp fall in European equity market indices. But in the view of analysts at Natixis, as soon as there is good news about the war in Ukraine, the various factors supporting the European equity market will make European equity indices bounce back sharply.

The potential for a rebound in European stock market indices is significant

“The war in Ukraine has driven down European stock market indices for understandable reasons: Increased risk aversion; Loss of growth in the eurozone due to inflation and supply problems; Asset losses in Russia for some companies.”

“European stock market indices will be supported by: The significant fiscal support being rolled out; The fact that real long-term interest rates will be highly negative for a long time, due to the ECB’s weak response to inflation, which will speed up investors’ rotation from bonds to equities; The low indexation of wages to prices, which will protect corporate earnings; The fact that the financial situation of euro-zone companies before the war in Ukraine was solid, in particular, due to a fall in debt net of cash reserves.”

“We can expect European share prices to rapidly bounce back as soon as a sign of an end to the crisis appears.”