JP Morgan analysts turn bullish on Eurozone equities to join US rally

A major Wall Street investment bank changed its view on European stocks Monday, signaling that shares in the region now present better opportunities following an extended period of weak performance.

J.P. Morgan moved its rating on euro zone equities to “overweight” from “neutral,” with strategist Mislav Matejka and his team declaring that “the time is coming up to turn bullish on Eurozone equities.”

The Euro Stoxx 50 has fallen behind the S&P 500 by almost 18% after a robust start in the first three months of the year. However, Matejka pointed out that this gap in performance could now present a chance for investors to step in.

Cheap valuations and EU tariff deal fuel optimism

Several factors make the case for European stocks more compelling, according to the investment bank. Shares in the region trade at lower prices compared to American companies as reported by Reuters. Possible stimulus measures from Germany and signs of better credit conditions across the euro zone could lift investor confidence.

The firm also highlighted that a 15% duty on goods from the European Union has been settled, removing a key concern that had been weighing on the market.

J.P. Morgan maintained its favorable view on defense companies in Europe. The bank expects increased spending in this area to benefit sectors including industrial firms, construction materials producers, and utility companies.

While political troubles in France might create some pressure, Matejka suggested investors should “use the weakness to buy, as we believe that any pressure will not be long-lasting.”

Better company profits and more stock repurchase programs should support a brighter picture for the euro zone going into the coming year. The bank kept its forecast of 5,800 for the Euro Stoxx 50 by year-end. Data from LSEG shows the benchmark has climbed 10.4% so far this year.

Six-day rally pushes European markets toward records

European markets were heading for their best weekly showing since May, posting gains for six straight sessions as previously reported by Cryptopolitan. Enthusiasm about advances in artificial intelligence technology has driven the rally. The Stoxx Europe 600 Index added 0.5%, reaching a new peak last week.

Mining and banking stocks led the advance, while technology, along with food and beverage companies, lagged. The French CAC 40 index gained 0.3% after Prime Minister Sebastien Lecornu promised to break a political standoff and push through a budget before the year ends.

Among individual companies, Legrand SA jumped as much as 2.3% to reach a record. The electrical equipment manufacturer announced it will acquire Avtron Power Solutions for $1.125 billion in enterprise value to grow its business in energy transition products.

European stocks had a solid beginning to the fourth quarter, topping their previous high from March. Strong performance from pharmaceutical companies and positive expectations about Federal Reserve interest rate reductions powered the gains. Market participants have wagered that enormous investment flowing into the AI sector will boost earnings and push technology stocks higher.

“Gains this year have been driven by multiple expansion,” said Maud Giese, who handles investment strategy for Swiss and global stocks at Union Bancaire Privée. “Sentiment could remain constructive in the near term, but if macroeconomic risks that materialize that might lead to a quick reversal.”

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