LIVE MARKETS-German opportunity?

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GERMAN OPPORTUNITY?

After roaring higher in the early part of this year, European equities have been treading water over recent months, as investors wait for a new catalyst that could drive price action in the region.

Next week's U.S. payrolls report could knock major bourses out of their range and Trump's latest tariff blitz brings another risk, but Barclays analysts are also highlighting the upcoming "budget season" in Europe.

Germany, the main driver of Europe's equity strength this year, kicked off its budget negotiations this week and concerns have risen about funding infrastructure projects and a dialling down of reforms.

"Consequently, sentiment toward German-exposed equities has soured, with flows turning negative," writes Barclays.

Germany's DAX .GDAXI is down 1.2% in September, compared to a 0.3% gain for the pan-European STOXX 600 .STOXX. The MDAX .MDAXI and SDAX .SDAXI indexes of mid- and small-cap German stocks, which typically have more domestic exposure, are down 1.4% and 0.7%, respectively.

Barclays expects some near-term volatility in German equities until November 27, when the budget is expected to be finalised, but thinks that could create a buying opportunity.

"As the froth that was built to into the exposed names is being wiped out, we would opportunistically re-engage with the space on further pullbacks, particularly as visibility on fund deployment improves," Barclays says.

(Samuel Indyk)

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