LONDON, Sept 12 (Reuters) - Bank of America Merrill Lynch strategists said on Thursday they expect European equities to rise 5% in the next six months, mainly driven by cyclical stocks.
“We expect Euro area PMI momentum to remain positive over the coming six months, helped by a fading drag from credit conditions, an improving inventory cycle and a mildly positive tailwind from the fiscal impulse,” BAML strategists said in a note.
They turned bullish on the region’s banking sector, the only sector in negative territory year-to-date, and mining, which has underperformed the broader indexes.
Since mid-August, cyclical sectors have outperformed the defensive sectors, a sharp reversal in investors’ positioning. BAML believes this trend will continue.
The bank said it sees the pan-European STOXX 600 rising about 1.5% from current levels to 395 points by year-end. (Reporting by Thyagaraju Adinarayan, editing by Danilo Masoni)