Live Markets: UBS' four reasons for liking European stocks
LIVE MARKETS-UBS' four reasons for liking European stocks Adds blog post
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UBS' FOUR REASONS FOR LIKING EUROPEAN STOCKS
UBS are now one of the bigger bulls when it comes to European stocks and they have a new note out with four reasons justifying their stance.
They have a target of 690 for the STOXX — a 7.5% gain from current levels — and without further ado, their reasons for optimism are:
1. Earnings upgrades from AI capex beneficiaries have been strong.
That's not a new story for Europe. Companies in the semiconductor supply chain or involved in data centre buildout have been one of the few sources of optimism, but UBS says the earnings upgrades have been greater than expected, and they think will be long lasting.
2. The US manufacturing cycle is improving. "European companies benefit directly (industrials) and indirectly (weaker EUR) and could see a similar acceleration as destocking turns to restocking in 2H."
3. Bank earnings have continued to be revised higher. Again that's an old story, financials were among the big European winners last year, but UBS said think there is room for this to continue.
"Valuations remain supportive and (banks and insurers) both continue to benefit from a rate environment that is substantially better than investors had become accustomed to over the previous decade."
4. Sectors that previously had been struggling have stabilised and are no longer a drag on the index. As examples they point to consumer Staples, luxury and pharma are all of which are seeing their negative revisions stabilise. "We think Pharma at least may turn the corner into upgrades in 2H."
(Alun John)
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EARLIER LIVE MARKETS POSTS:
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