LIVE MARKETS-FTSE 250 turning the corner

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FTSE 250 TURNING THE CORNER

UK midcaps seem to be turning the corner, with the FTSE 250 set to deliver stronger EPS growth in 2025 than the FTSE 100 and the STOXX 600, according to UBS.

"The UK stands out with 12-month earnings momentum surpassing that of Europe. While revisions remain mostly negative for 2025, the tone seems less deteriorative than

before," says Sutanya Chedda, strategist at UBS.

"The economy still has potholes, but the broader message from our regime maps is that conditions are no longer deteriorating," he says.

In general, UK stocks continue to be cheap compared to global peers, trading at a 37% discount to the MSCI World index, with valuations improving a tad after hitting the highest discount ever in 2024, when the gap rose to 43%.

UBS said UK equities remain cheap relative to Europe on both P/E and P/B. The depth of that discount is more pronounced in the FTSE 250, but things for mid caps could be improving, according to UBS.

"While SMIDs (small and midcaps) still trade at multi-sigma discounts, what's clear is that value alone isn't enough anymore. The market is starting to differentiate across quality, momentum, and ownership," the bank said.

The Bank of England is expected keep interest rate unchanged at this week's policy meeting, after the August cut. UBS said it is leaning into UK names that benefit from rate cuts and resilient local growth.

(Joice Alves)

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