Strategists are slashing their targets for European equity markets, with the region's benchmark now seen ending 2022 flat amid the Russia-Ukraine war, soaring commodity prices, and central bank tightening.
The Stoxx Europe 600 Index will be modestly changed by the end of December 2022, at 488 index points, according to the average of 16 forecasts in Bloomberg's monthly survey, implying about 12% upside from Monday's close, after a selloff that wiped as much as €2.4 trillion in value from the region's benchmark this year.
Strategists have cut their targets by an average of 3.7% from the last survey, with some slashing forecasts by as much as 12%.
Barclays Plc's BCS strategist Emmanuel Cau's new year-end target of 465 index points for the Stoxx 600, an 11% cut from his prior view, implies a drop of about 5% this year.
UBS AG UBS strategists, who were particularly bullish on earnings growth earlier this year, have almost halved their 2022 EPS growth forecast to 8% from 15%.
Bank of America Corp's BAC March global fund manager survey showed that allocations to the euro area plummeted 48 percentage points to a net 18% underweight over the past month.
"Slowing growth and rising real bond yields make for an unfavorable macro backdrop for European equities," said BofA strategists. They see the Stoxx 600 plunging to 410 points by the third quarter and have a year-end target of 430.
Some strategists are more optimistic. JPMorgan Chase & Co's JPM Mislav Matejka cut his Stoxx 600 target to 500 from 520 but doesn't see equities falling from current levels, especially not on anything longer than a one-month horizon. "The risk of being whipsawed remains high," he said.
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