UBS has raised its Stoxx 600 target to 690 points from 630, forecasting an 8% upside as European earnings growth continues to support the market rally. According to reports from Bloomberg, UBS strategists Gerry Fowler and Sutanya Chedda made this revision, with the investment bank expecting the rally to continue through 2027. The multinational financial services firm has set a more ambitious 760 target, implying a 19% gain over the next 18 months. This bullish stance has made UBS the most optimistic house in a recent survey of 18 strategists, with the average forecast now at 647 points by end-2026, representing less than 1% above current levels. UBS strategist Gerry Fowler noted that "there's probably more upside than downside risk at this point," reflecting confidence that Europe's earnings growth and stock rally can maintain momentum despite geopolitical strains.
European stocks have demonstrated resilience, climbing back to record territory this year after a volatile first half. As reported by Bloomberg, the index set a record close near 652 points on July 3 and has since eased to about 639 points, but remains up more than 7% for the year. The rally has held up even as Middle East tensions resurfaced and oil prices climbed, partly because crude remains far below its April intraday peak. UBS strategist Gerry Fowler noted that "there's probably more upside than downside risk at this point," reflecting confidence that Europe's earnings growth and stock rally can maintain momentum despite geopolitical strains. European stocks made fresh record highs this month, with investors increasing exposure to the region again as worries about the Iran war faded after the April ceasefire.
The positive outlook is gaining momentum across the banking sector, with rival institutions also raising their European stock targets. According to Bloomberg reports, UBS's 2026 forecast sits above JPMorgan's previous highest target of 680 points. Bank of America, Deutsche Bank, and Kepler Cheuvreux have also lifted their targets, with analysts pointing to stronger AI-related upgrades, steady bank revisions, and reduced drag from large defensive sectors as key drivers. The shift reflects stronger bottom-up evidence across major European sectors, with healthcare, consumer staples, and luxury having fewer obvious negative catalysts, while banks, industrials, and companies tied to AI spending offer more scope for earnings upgrades. Bottom-up evidence suggests that negative catalysts are becoming "harder to locate" among many heavyweight sectors such as healthcare, consumer staples and luxury, with the list of themes with scope for positive revisions getting longer.
Market sentiment among strategists shows a cautiously optimistic outlook, with the July poll of 18 strategists putting the index at 647 on average by end-2026, representing less than 1% above current levels. As reported by Bloomberg, only 5 of the 18 strategists expect the index to fall by year-end, with just 2 seeing declines steeper than 5%. TFS remains the most bearish, projecting a 9% drop to 585 points, while Société Générale sees the Stoxx 600 falling to 600. However, a Bank of America fund manager survey showed improved investor sentiment, with a net 37% of European investors now expecting a "Goldilocks" environment of stronger growth and cooling inflation over the next three months, compared with a net 4% expecting declines in June. A net 54% of investors expect the region's equities to rise over the next few months, up from a net 4% expecting declines in June.
The market's resilience is being supported by strong corporate earnings performance, with more than 45% of firms already beating estimates in the second quarter, while 27% have missed. According to Bloomberg reports, earnings growth is tracking 11.6% year over year, broadly in line with expectations. A Citigroup gauge of European earnings revisions excluding the U.K. rose to its highest level in five years, with 80% of sectors in net upgrade territory. Profit estimates point to earnings-per-share growth of 14% in 2026 and 10% in 2027. The second-quarter reporting season has started on a stronger note, with several companies delivering upgrades, while a net 54% of investors expect regional equities to rise compared with a net 4% expecting declines in June. A positive global economic backdrop and heavy fiscal stimulus in Europe combined with the benefits of AI spending and adoption have buoyed sentiment, with recent upgrades standing out for their magnitude, breadth and timing.
