Whereas Europe is not immediately impacted by U.S. President Donald Trump’s newest tariff threats , it might have a knock-on impact on European exports if the greenback continues to weaken. With the euro robust compared, Gerry Fowler, who head up UBS ‘ U.S. and European fairness and by-product technique group, expects European exports to really feel the consequences. “Europe goes by way of what our economists name the J curves, which is a few quarters of roughly zero GDP development, however the actuality is, if you consider the character of GDP being consumption, funding, authorities spending and web exports, almost all the weak point is in that web export class,” Fowler instructed CNBC’s ” Europe Early Version ” on Monday. “The remainder of Europe is definitely doing effective — consumption, funding, authorities spending, all progressing as they have been,” he added. Consequently, home industries stay engaging to UBS, particularly given earnings seem like on the up. The euro is up round 12% in opposition to the U.S. greenback year-to-date. Sector picks Fowler has his eye on utilities, telecoms, banks and a few segments inside industrials, equivalent to electrification, which has “rather a lot much less foreign money and tariff sensitivity.” Nonetheless, Deutsche Financial institution has taken an underweight place on telecoms, in response to a be aware issued in October. The sector has carried out nicely this yr however that is led to “unattractive valuations,” the German financial institution stated. “I might name the utility sector — for the primary time in in all probability 20 years — development at an affordable value,” UBS’ Fowler added, noting that “they’re simply nonetheless too low-cost for the expansion that they are producing.” Such corporations are “investing rather a lot much less as a result of they’ve already achieved their broadband rollout, so their money circulation is exploding, dividends are rising, etcetera. Plus, they’re in all probability beneficiaries of digitalization,” he stated. Regardless of a current Nasdaq rally , banks are “nonetheless no less than 20% low-cost to the market,” whereas electrification corporations throughout the industrial sector are “chugging away very properly” with “stable earnings development, constant upgrades, not costly, and positioning is not excessive,” he added. Protection shares Protection is the most popular ticket of the season, however Fowler dubbed it “actually fairly costly and crowded,” so will probably be troublesome to improve momentum and be drivers of outperformance. Fowler’s place mirrors an analyst be aware issued by UBS final month, the place the agency upgraded its Stoxx 600 goal to 600 for 2025 and 650 for 2026, which it stated are on the upper finish of sell-side positioning consensus and aligned with bottom-up goal costs. It could mark annualized returns of 10%, Fowler famous, “which Europe hasn’t seen for some time.” “It could not beat another markets all over the world, but it surely’s actually going to get fairly near matching them, and buyers globally are nonetheless too underweight Europe for that setup,” he added. Certainly, Deutsche Financial institution has closed its impartial stance on Europe and turned it constructive, versus the U.S, the be aware stated. It’s significantly bullish on Germany and is anticipating renewed curiosity within the nation’s midcaps, it added. Analysts from Deutsche Financial institution have additionally maintained their constructive view on the smaller German index, MDAX, per the be aware. They’re additionally watching shares in banking, supplies, and healthcare.
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