Europe News

Expect Short-Term Market 'Bounce': Analyst

As European shares rose slightly Monday after last week's falls, one analyst said that investors should expect a short-term "bounce" in the market soon.

"The market is oversold and we should see another market bounce in the short-term," Philipp Baertschi, chief strategist at Sarasin, told CNBC."There's still a lot of selling but this usually creates good buying opportunities."

As equity markets have plunged and the price of gold has soared in recent weeks, traders have been trying to work out how to play the market turbulence.

They should look at companies where dividends are growing or "very safe" for the next three years, according to Baertschi, who cites the consumer staples and healthcare sectors.

He also sees opportunities in the insurance sector as it's "safer" than general financial stocks.

"Valuations have fallen back to the levels of October 2008 and for longer-term investors that's a good entry point," he said.

There has been renewed speculation that the Western world could suffer a second recession after slowing GDP figures, uncertainty about the survival of the euro zone and continued concerns about the US economy.

Figures from the Organisation for Economic Co-operation and Development (OECD) showed GDP growth in OECD countries, including the euro zone, the US and Japan, contracted further in the second quarter of 2011, on Monday.

Baertschi thinks there is a "50 percent probability" of a second recession and believes markets will be lower at the end of the year after a short-term bounce.

"It's time to look at your long-term equity exposure," he said.

He believes "political actions" are the main element in the short to medium term.

German Chancellor Angela Merkel proclaimed at the weekend that she would not allow pressure from the markets to force the euro zone into a much-rumored Euro bond scheme.