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Investing.com -- Deutsche Bank reiterated its bullish outlook on European equities, seeing further potential for outperformance following the historic decision on the German fiscal spending package in the Bundesrat on Friday.
The bank highlighted that the decision was a key development in a series of supportive events, which further strengthened the bank’s stance on European stocks.
While Deutsche Bank (ETR:DBKGn) had already been positive on European equities relative to the U.S., the surprising sequence of supportive events has reinforced their outlook.
“We had been bullish on European equities in absolute as well as relative terms into the year,” Deutsche Bank stated. “However, even we were surprised by the sequence of supportive events for our call.”
The firm expects U.S. Tech to no longer be a major driver of relative outperformance, and while the possibility of a ceasefire remains an upside risk, it is too difficult to quantify.
Nevertheless, they stated that the relative trends in economic outlook, earnings growth, and political uncertainty continue to favor European stocks over their U.S. counterparts.
Deutsche Bank continues to prefer European equities, particularly excluding the tech sector, despite their strong outperformance so far.
However, the bank noted the risk of political uncertainty in the U.S. affecting business confidence, which could create short-term downside risks for European stocks.
The bank sees the potential for a softening tone in U.S. politics to boost global equity markets later this year, providing further upside for European stocks.
Despite the strong rally, Deutsche Bank remains overweight European equities, seeing continued opportunity for outperformance in the near term.