HSBC has revised its target for the STOXX 600 index upwards to 680 points, driven by expectations of robust earnings growth and renewed confidence in European equities. The brokerage expects the index to reach 680 points by year-end from its previous forecast of 670, implying about 6.3% upside from current levels. The forecast extends to 760 points by the end of next year, marking the first upward revision for the index this year. As per Reuters, the revision reflects stronger earnings prospects, firmer business confidence and a healthier economic outlook for the region. HSBC is the latest brokerage to turn more optimistic on European equities, as investors look past geopolitical risks and focus on the region's ability to withstand recent economic and energy shocks.
HSBC forecasts European earnings growth of 15.6% in 2026 and 15.4% in 2027, as reported by Reuters. The brokerage noted that European companies are becoming increasingly domestically focused, with regional revenue exposure rising to its highest level since 2017, somewhat shielding them from currency movements even as overseas sales still account for about half of revenue. A weakness of the euro and other European currencies against the US dollar could provide an additional tailwind for corporate profits, with HSBC adding that weaker European currencies are expected to serve as a profit catalyst for the region.
HSBC upgraded Italy to 'overweight' from 'neutral', citing lower reliance on Middle Eastern gas imports, while downgrading France to 'underweight' on weaker economic forecasts and deteriorating consensus estimates, according to Reuters. The brokerage also raised its year-end target for Britain's FTSE 100 index to 11,390 from 10,980, implying nearly 6.5% upside from current levels. Recent data have also eased concerns that geopolitical tensions would significantly derail growth, with the positive market trends supporting the upward revision in HSBC's forecasts for European equities.
The changes add to a broader shift toward a more constructive view on European equities across the market, as reported by Reuters. Recent data have also eased concerns that geopolitical tensions would materially derail growth, with the positive market trends supporting the upward revision in HSBC's forecasts for European equities. The optimistic outlook reflects growing confidence that European companies can navigate current challenges while benefiting from improved domestic focus and favorable currency dynamics.
