BENGALURU (Nov 13): Goldman Sachs on Friday raised its 12-month target for Europe's STOXX 600 index, saying European equities have the most to gain from relief on energy supply and prices.

The Wall Street brokerage expects the pan-continental index to reach 700 points, up from its previous forecast of 695, implying about 5.42% upside from current levels of 664.01.

Goldman expects European earnings growth to slow to 7% in 2027 from 18% in 2026, partly due to lower energy earnings as well as weaker economic growth and margins, as higher energy costs and interest rates feed through.

It downgraded European energy sector to "underweight" from "neutral".

European stocks have found support in strong quarterly earnings, despite persistent inflation and fears of further rate hikes.

"That said, we continue to see capex rising in Europe and globally and expect data centre rollout to remain a strong driver for sector earnings", strategists led by Sharon Bell said.

Europe is still cheaper than the US, the brokerages said, but the gap is smaller than it was, and the main reason is that US stocks have become cheaper relative to their earnings.

Goldman also cut its rating on European banking sector to "neutral" and insurers to "underweight," saying both groups tend to be positively correlated to bond yields, which it expects to fall.

The STOXX 600 index has risen over 12% so far this year, slightly above a 10.9% gain in the S&P 500.

Investors, especially from the US, are putting increasing amounts of money into Europe, mainly through global and global ex-US funds, the brokerage added.

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