LIVE MARKETS-Citi's positive view on Europe turns more 'structural'

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CITI'S POSITIVE VIEW ON EUROPE TURNS MORE STRUCTURAL

When Citi equity analysts turned positive on Europe last year, their call was tactical in nature, based on signs of extreme positioning and peak bearishness. But they now say the positive view has become more structural.

In a note published on Tuesday, Citi say this is supported by:

1/ Multi-year flow dynamics, which have led to sustained over-ownership of U.S. equities over global peers

2/ Improving medium-term economic/EPS growth via increased fiscal spending which should support higher price-to-earnings multiples

3/ Growing cracks in U.S. exceptionalism due to DeepSeek developments and U.S. policy uncertainty, including tariffs and Section 899 in Trump's fiscal plans

Nevertheless, Citi believes near-term headwinds remain, including U.S. trade policy, euro strength and bond market volatility. The bank's year-end STOXX 600 .STOXX target of 570 implies about 3% upside from its current level.

Within Europe, they maintain a preference for "beaten up cyclicality" and are overweight tech, travel & leisure, autos and real estate.

(Samuel Indyk)

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