UBS Raises Euro Stoxx 50 Targets#

UBS, a major financial services company, has increased its target for the Euro Stoxx 50 index to 6,400 by June 2026 and 6,600 by December 2026. This is a significant rise from the current level of 5,587. The firm anticipates a recovery in corporate earnings across the Eurozone after three years of stagnation.

Expected Earnings Growth#

The brokerage forecasts that Eurozone earnings will grow by 7% in 2026 and 18% in 2027. This growth is expected to be fueled by a rebound in manufacturing activity, stable core inflation (the underlying inflation rate excluding volatile items), clearer trade tariffs, and supportive monetary and fiscal policies globally.

Factors Influencing European Equities#

UBS identifies three main factors shaping European stocks at the beginning of 2026: 1. A stronger economic outlook, with manufacturing activity reaching multi-year highs and a robust earnings season in the fourth quarter. 2. Concerns about potential disruptions from artificial intelligence (AI), leading to a shift from digital to physical sectors. 3. Increased tensions in the Middle East, which have raised worries about energy security.

However, UBS notes that the energy risk from the Middle East is less significant than the past Russia-Ukraine crisis, as the region only accounts for 4% of EU gas consumption. Unlike in 2022, when central banks were aggressively raising interest rates due to inflation, UBS expects them to manage the current energy supply issues more calmly.

Sector Preferences and Scenarios#

Within Europe, UBS favors sectors such as information technology, industrials, and real estate, particularly highlighting Germany. The firm has downgraded banks to a neutral rating, citing a more balanced risk-reward outlook after strong recent performance.

In an optimistic scenario, UBS sees the Euro Stoxx 50 reaching 7,100 by December 2026, driven by faster growth and supportive policies. Conversely, in a downside scenario, the target could drop to 4,400 due to risks like prolonged energy disruptions and renewed trade tensions.