Goldman, UBS bearish on European stocks

A trader works at the Frankfurt stock exchange in Frankfurt, Germany. Picture: REUTERS/TIMM REICHERT

While the 444 point target implies 5% upside from Wednesday’s close, the likelihood of a strong second-half rebound is fading, with strategists slashing estimates by 23 points since last month’s fairly optimistic survey as an energy crisis and concerns around gas flows add to challenges including rate hikes and a looming recession.

European equities have bounced back from an 18-month low reached in early July, but are down 13% this year amid a wall of worries that keeps building up. Elevated commodities prices continue to fuel inflation, which reached a record 8.6% for the euro area in June, prompting the European Central Bank to hike rates by 50 basis points on Thursday.

Bank of America strategist Milla Savova agrees that the Stoxx 600 has bottomed. “We see no further downside for the Stoxx 600 after the sharp decline since January, which is why we lifted our stance on the market from negative to neutral last month,” said Savova, who reiterated her year-end target of 430 index points.

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