UBS has grown more optimistic about European equities, saying that surprisingly strong PMIs, fewer earnings downgrade risks, and valuations that wrongly assume zero growth could help drive a near 9% rise in the STOXX 600 SXXP by year-end.

The Swiss bank now sees the index reaching 600 points by end-2025 and climbing further to 650 in 2026.

To hit those targets, UBS expects financials and industrials, which make up 45% of the market, will have to rally 10–12%, while laggards such as consumer staples, discretionary and IT are seen posting more modest gains of up to 5%.

With earnings downgrades slowing and becoming more stock-specific, UBS believes 2026 EPS estimates can steady following recent tariff and currency-related cuts. It notes early signs of upgrades in sectors like banks, retail, insurance, transport, utilities and some industrials.

UBS strategist Gerry Fowler highlights lingering scepticism over whether policymakers are truly committed to supporting corporate profitability, but says Europe would look undervalued if confidence in earnings growth returns.

“Our view is that as Europe begins to demonstrate resilient earnings growth, we expect to see capital reallocation from large global money pools,” he concludes. “Scepticism still has more room to rise than fall”.
Source: Reuters (Danilo Masoni)