The “strongest bulls” in European stocks were born! UBS raised the Stoxx 600 Index target in a big way to 690 points

The Zhitong Finance App learned that UBS Group strategists said that stronger profits and broader gains will drive the European stock market to a new high this year. These strategists have now become the most staunch bulls among forecasters tracked by Bloomberg.

The bank's strategists Jerry Fowler and Sutanya Cheddar raised the year-end target of the Stoke Europe 600 Index from 630 points to 690 points, which means there is room for an increase of about 8% from current levels.

Their new forecast surpassed the previous high of 680 points set by J.P. Morgan's Mislav Matejka last month. The UBS team believes this increase will extend to 2027, with a target of 760 points, which means 19% growth over the next 18 months.

UBS strategists believe there is room for further growth in the European stock market

The strategists wrote, “It's time to be less cautious,” and “we raised the Stoxx 600 target because earnings are more resilient and better than expected.”

For the team, three things have changed: the upgrade performance related to artificial intelligence is stronger, bank stocks continue to face positive earnings revisions, and driven by the weakening of the euro, large defensive sectors are no longer dragging down the index. They said these changes were enough to support earnings growth of more than 10% and higher valuations.

European stock markets have rebounded from the decline caused by the war in Iran, and the recent renewed tension was not enough to destroy this rally. Economic indicators were mixed, but analysts continued to raise earnings expectations until the second quarter earnings season arrived. They expect profit growth of around 12% for the quarter.

The rise in the European stock market was mainly driven by earnings growth

According to Fowler and Cheddar, the earnings season will further consolidate the growth momentum and should confirm that Europe's economic conditions are better than those shown by current economic opinion.

They said, “We expect investors to focus on three questions: whether AI-related upgrades continue, whether bank stocks are still bringing positive earnings revisions, and whether the defensive sector is finally stabilizing.” “These answers should support the recent improvement in market sentiment.”