Barclays analysts have tactically upgraded European stocks to Overweight, the bank said in a note Wednesday.
The firm said it sees catch-up potential for Europe due to a plethora of factors.
The firm noted the pick-up in domestic growth on the fading destocking cycle and rising consumer real income, as well as signs of life in China activity.
Furthermore, they pointed to the potential for more ECB and BoE rate cuts compared to the Federal Reserve, the cheaper valuations, and the value/cyclical tilt.
"Structural issues and geopolitical risks for Europe are not going away, while big Tech still plays for the US, but we see relative value and depressed positioning improving the tactical risk-reward for Europe/UK," wrote Barclays.
"We raise our YE target for SXXP from 510 to 540, and add further to our pro-cyclical stance, upgrading Chemicals to OW and cutting Healthcare to MW," they added.
The bank continues to see rotation towards commodity plays (Energy and Mining), banks and small caps, as the reflation trade gathers momentum.