J.P. Morgan Lifts European Equity Targets as Earnings Improve, Risks Ease
J.P. Morgan Raises Year-End Targets for European Equities
June 29 (Reuters) - J.P. Morgan raised its year-end target for European equity indexes on Monday, citing corporate earnings strength and improvements in the geopolitical climate.
The Wall Street brokerage lifted the benchmark STOXX 600 index target to 680 from 630, implying an upside of about 7% from Friday's close of 635.88 points.
J.P. Morgan also raised its target for the MSCI Eurozone index - a performance gauge for euro-area equities, to 420 from 385.
Impact of Geopolitical Developments on Markets
Global financial markets have been bearing the brunt of the months-long Middle East conflict that has triggered inflation and potential rate hike concerns, but a U.S.-Iran peace deal has brought some stability.
"As the market continues to unwind the conflict's impact, Eurozone should stand to benefit," J.P. Morgan analysts leadby Mislav Matejka said in a note.
"Additionally, if we see a broadening of the market in the 2H, Europe may once again become a compelling story."
Risks and Opportunities for European Equities
While risks remain, including renewed geopolitical escalation, J.P. Morgan said, Europe could look attractive if markets resume pricing out the impact of conflict and market breadth improves.
A deeper-than-expected fall in oil prices, lower bond yields, reduced tariffs and a pickup in China's economy could further support equities, the brokerage said, noting global investors remain underexposed to the region.
"We find that global investors don't have much risk in Europe."
Other Brokerages Adjust Targets
Earlier this month, Barclays also raised its STOXX 600 year-end target and dropped its bearish stance.
Euro Zone Seen as Key Driver
EURO ZONE SEEN AS KEY DRIVER
Profit Recovery and Earnings Outlook
J.P. Morgan reiterated its 'overweight' stance on euro zone equities, pointing to a strong profit recovery outlook.
It expects euro zone earnings to grow about 20% in 2026 after contracting last year, a key driver for regional markets.
"Robust earnings growth likely to be supported by a continued rebound in (economic) activity indicators," the brokerage added.
Growth Dynamics and Policy Support
The brokerage said improving growth dynamics and policy support could sustain the rally, particularly if macro conditions stabilise and earnings upgrades continue.
It also highlighted that positioning remains light, leaving room for inflows if sentiment toward the region improves.
Reporting and Editing Credits
(Reporting by Rashika Singh in Bengaluru; Editing by Janane Venkatraman)
