"Don't give up on Europe," says UBS
STOXX 600 down 0.8%, volatility spikes
US-Russia tensions rise over Ukraine
Nestle to cut costs by $2.8 billion
Wall St futures inch lower
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"DON'T GIVE UP ON EUROPE," SAYS UBS
Poor earnings and macro data have led UBS to cut its European equity allocation to benchmark, but at the same time they warn investors should not turn outright underexposed.
Andrew Garthwaite and other strategists at the Swiss bank expect the factors that drove the downgrade to eventually change, with falling oil, German politics and Ukraine likely providing "upside surprises" at some point.
China, of course, is the big risk for European equities, they say, but an expected drop in energy prices, an estimated $600 billion investment to rebuild Ukraine and German elections likely leading to more fiscal spending will boost growth.
"Don’t give up on Europe," they write.
On top of that, they single out other market-related reasons as to why investors should not go underweight.
Sector adjusted PE to the U.S. is now on a 25% discount
Markets are expecting the gap between US and European GDP growth to widen, but in fact the gap is closing
1% off rates adds 1% to GDP after a year
10% off euro adds 10% to EPS growth
Europe's superior fiscal position is not reflected in valuations
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FOR TUESDAY'S OTHER LIVE MARKETS POSTS
AUTOS AND BANKS DENT STOXX, RUSSIA WORRIES MOUNT CLICK HERE
EUROPE BEFORE THE BELL: POSITIVE START IN STORE CLICK HERE
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