PARIS – The eurozone's recession likely sharpened at the of last year but the single currency zone will begin to rebound in the second quarter of this year, forecasters at German, French and Italian agencies said Wednesday. Ifo, INSEE and Istat said in a joint statement that “...business surveys as well as the decline of the industrial production in October suggest a further decrease of activity in” the fourth quarter of 2012 of 0.4 percent compared with the previous quarter. The eurozone economy contracted by 0.1 percent in the third quarter after a 0.2 percent drop in the second quarter. The three agencies had forecast a drop of only 0.1 percent in the fourth quarter of 2012 in their previous forecast in October. They now expect the eurozone economy to stagnate with 0.0 percent growth in the first quarter of 2013 followed by a mild recovery of 0.2 percent in period from April through June. The institutes expect the eurozone to benefit from an increase in external demand thanks to faster growth in emerging countries and the resolution of a fiscal standoff that should help the US economy to recover. “The easing of tensions surrounding sovereign debts would support a stabilization of investment over the forecast horizon,” the forecasters said. The eurozone economy would also be boosted by a “decrease of inflation and the mitigation of fiscal consolidation efforts,” they added. Meanwhile, rallying telecom stocks and a bullish start to the new earnings season propelled Europe's top shares to fresh 22-month closing highs on Wednesday. The STOXX Europe 600 telecoms index rose 2.7 percent, the top sectoral gainer, with traders citing a Financial Times report saying top telecommunication firms were discussing a pan-European infrastructure network to unite Europe's disjointed national markets as a reason for the rise. The FTSEurofirst 300 provisionally closed up 7.76 points, or 0.7 percent, at 1,167.96, also lifted by a bullish start to the US earnings season after aluminium giant Alcoa's in-line profits and above-consensus revenues. Equities are being lifted by the apparent reduction in risk posed to the macro economy from the euro zone debt crisis and budget issues in the United States. “It has been a good start to 2013 and equity investors have been buying into the idea that we have negotiated the worst case scenario,” said William De Vijlder, chief investment officer for strategy & partners at BNP-Paribas Investment Partners. — Agencies
