LIVE MARKETS-Are European equity valuations high?

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ARE EUROPEAN EQUITY VALUATIONS HIGH?

With a forward PE approaching 15 times, UBS deems Europe's STOXX 600 .STOXX valuation as "a little high" - a perhaps counterintuitive take given the broad view of Europe being quite cheap, at least relative to Wall Street.

Strategist Gerry Fowler at the Swiss bank considers that number to be a "reasonable" year-end target given that growth in the region is set to pick up, but says further increases would need lower bond yields or risk premia.

"At this point, the valuation is looking a little high if just driven by growth optimism more than a year out," he says.

Fowler expects European equities will keep attracting investor interest into H2, with its economists speaking of a J-curve forecast for GDP growth due to the impact of tariffs.

"We must endure a third year of sluggish European growth but German stimulus is setting the scene for an acceleration into 2026/27," he says.

"... the main category of GDP uncertainty is in net exports. Consumption, investment and government spending are likely less volatile. This is a contrast to the US where all four components of GDP are highly uncertain."

(Danilo Masoni)

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