September 12, 2019 / 9:21 AM / 2 months ago

BAML sees 5% upside for European stocks in next 6 months

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)

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