Analyst Sees Further Gains for the STOXX 600 — Here’s Why

The STOXX 600’s recent record-setting run may still have room to extend, according to new commentary from UBS, which says Europe’s solid equity performance should continue as the region’s fundamentals improve.

The index has outperformed the S&P 500 this week, supported by strength in defense and banking stocks.

UBS stated in a recent note that it “anticipate[s] further gains supported by an improving cyclical outlook, a more favorable structural backdrop, and reasonable valuations.”

The bank highlighted that consensus now expects earnings growth of 7% this year and 18% in 2027, figures it argues make European markets attractive on a risk-adjusted basis.

Sector positioning is also a key focus. UBS said it likes European industrials, IT and utilities, calling them “beneficiaries of global secular changes.”

These include long-term themes such as automation, energy transition and digitization, which the bank believes will continue to support earnings momentum across the region.

Banks, meanwhile, are expected to benefit from what UBS describes as an “improving cyclical outlook” as well as fiscal stimulus in Germany. With the eurozone economy showing signs of stabilizing, the bank expects cyclical sectors to gain traction through the year.

Investors looking to capture structural shifts can also consider the firm’s “European Leaders” theme, which targets companies with strong competitive advantages in sectors exposed to long-term global trends.

Overall, UBS said Europe’s backdrop remains constructive, and with markets already breaking to new highs, it sees the potential for continued strength in the STOXX 600 as earnings and cyclical conditions improve.