European Equity Strategy: Time for less caution: SXXP target raised to 690

Research evidence excerpt

European Equity Strategy: Time for less caution: SXXP target raised to 690

Global Research

9 July 2026ab

European Equity Strategy Equity Strategy

Europe including UKTime for less caution: SXXP target raised to 690

Gerry Fowler

Strategist

Stoxx 600 to 690 in '26 (+8%) and 760 in '27 (+19%) gerry.fowler@ubs.com

+44-20-7567 5490

We raise our Stoxx 600 targets because earnings are more resilient/better than expected.

Three things have changed versus previous expectations: AI-related upgrades have been Sutanya Chedda

Strategiststronger/continue, banks continue to see positive revisions and large defensive sectors

sutanya.chedda@ubs.com

are no longer dragging the index lower (helped by Euro weakness). That is enough to +44-20-7567 8155

support robust earnings growth (>10%) and a higher valuation (~16x).

More and more companies talking better and better

The encouraging development is the breadth of the improvement. Positive

conversations are no longer confined to semis and AI beneficiaries. Luxury, staples,

pharma, banks and industrials are all reporting a more stable or improving earnings

outlook, making downside increasingly difficult to find at the index level.

Valuations should be pro-cyclical with earnings revisions

Europe starts from a reasonable valuation and light ownership position relative to other

major markets. Earnings revisions are turning positive, margins are expanding and

investors have become more willing to pay for growth. Those conditions have historically

supported valuation expansion rather than contraction.

Earnings season to reinforce momentum

Q2 earnings should confirm that Europe is holding up better than the macro narrative

suggests. We expect investors to focus on three questions: are AI-related upgrades