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Citi sharply raises global equity earnings estimate

People walk past Citi bank branch in New York City, U.S., March 17, 2020. REUTERS/Jeenah Moon/Files

LONDON (Reuters) - Citi analysts sharply raised their earnings per share (EPS) forecasts for world stocks on a top-down basis, saying their first response right after the COVID-19 was “too bearish”.

The bank now expects global EPS to contract 30% in 2020, a marked improvement from a 50% drop it had expected at the height of the coronavirus crisis.

The estimate is a stark contrast to bottom-up analyst consensus of 18% contraction in 2020, which Citi said “looks too optimistic”.

The U.S. bank sees MSCI all-country world stocks index .MIWD00000PUS to hit 705 by mid-2021, up 4% from current levels.

World stocks hit record high last week as unprecedented stimulus - $20 trillion and counting - is forcing a structural change in how financial assets are valued.

Citi said stocks look “expensive, but not ridiculously so”, adding that central bank actions can sustain higher valuations across all equity markets.

Reporting by Thyagaraju Adinarayan, editing by Louise Heavens