Five ideas for European stocks from UBS
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FIVE IDEAS FOR EUROPEAN STOCKS FROM UBS
UBS equity strategists have shared their most recent thinking on European stocks, with five ideas emerging against a backdrop of the ECB cutting rates before the Fed.
The first is to go long UK small and mid caps, a space which UBS says derated materially after the 2016 Brexit referendum and where earnings have been weak. "But not any more," they say.
Recent tax cuts, upcoming rate cuts and the potential for further fiscal spending and EU alignment, makes UK SMIDs more attractive.
The second is to go long European utilities, and the third is to go long European defence stocks.
In utilities, high single-digit growth is on the horizon after a decade of negative earning growth, and renewables could provide another uplift.
In the world of defence, tail-winds include renewed willingness to meet NATO spending commitments and a global trend of diversifying military equipment sourcing.
Another idea is to go long European media over food and staples retailing. Improving economic conditions mean advertising spending and music streaming are driving upgrades and strong performance for the former.
Finally, gold miners stand out, and this goes beyond Europe.
"Our model for a potential 'stagflation' narrative in the US highlights the potential for gold miner performance to continue," write the UBS strategists.
Onshore gold buying in China remains supportive, they say.
(Lucy Raitano)
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