LIVE MARKETS-Why is BlackRock just neutral on EU stocks?

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WHY IS BLACKROCK JUST NEUTRAL ON EU STOCKS?

A mix of factors ranging from more sustained rate cuts to expectations for higher defence spending and German fiscal stimulus to boost growth has fuelled a revival for European equities this year.

Yet, there is still a degree of scepticism around Europe, especially in the U.S., as a recent UBS marketing trip showed, while others like Citi see a further rise in geopolitical risks putting their structural overweight on Europe under pressure.

But why are many investors still lukewarm about the prospects for Europe Inc, despite such a strong start to 2025? To answer this, let's look at the latest weekly comment from the BlackRock Investment Institute.

"We are neutral, preferring the U.S. and Japan. We see structural growth concerns and uncertainty over the impacts of rising defence spending, fiscal loosening and de-escalation in Ukraine," wrote the world's biggest money manager.

"... we think U.S. equities will regain global leadership as the AI theme keeps providing near-term earnings support and could drive productivity in the long term."

In short, BlackRock remains a big AI fan and sees structural issues working against Europe.

That being said, the company - which upgraded Europe to neutral from underweight in February - sees room for more ECB rate cuts, which could support an earnings recovery.

(Danilo Masoni)

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