LIVE MARKETS-European cyclicals particularly vulnerable if trade tensions escalate - GS

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EUROPEAN CYCLICALS PARTICULARLY VULNERABLE IF TRADE TENSIONS ESCALATE - GS

European cyclical stocks look particularly vulnerable should trade tensions between the EU and the U.S. escalate further, say Goldman Sachs strategists.

According to LSEG Workspace, a basket of European cyclical stocks .MIEU0CY00PUS is up 22.5% in 2025 so far, outperforming its defensive counterpart, which is up 12.3% .MIEU0DE00PUS.

"Given their recent performance and valuations, these sectors could be hit hardest," wrote GS in a Friday note.

Cyclical sectors include banks, autos, airlines and luxury goods.

Economists at the investment bank expect new tariffs to weigh heavily on euro area growth.

If no deal is struck, the drag on GDP could reach 1% by end-2026.

Overall, GS projects 0% EPS growth in Europe for 2025, flagging "subdued economic momentum, strong European currencies, and weaker energy prices."

They add that flows into European equities have improved but remain weak overall.

"Recent months have seen renewed interest, especially from domestic investors. However, cumulative flows remain weak, and positioning by European investors is still relatively light," they say.

(Lucy Raitano)

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