STOCKS NEWS EUROPE-Buy DAX and sell Swiss SMI "calls" - Barclays

Barclays equity derivatives strategists back buying "call" options, betting on further gains on Germany's DAX equity index while selling "calls" on the Swiss SMI equity index, arguing the DAX should outperform as the macroeconomic cycle improves.

The DAX has risen 18 percent since the start of 2013, less than a 21 percent gain on the SMI (KOSDAQ: 100660.KQ - news) , but the strategists feel the DAX could outperform going forward.

"The DAX has underperformed the SMI year to date, but has shown a 4 percent outperformance versus the SMI since August," they say.

"While the relative performance has already started to price in a pickup of global growth, we believe that there could be a more sustained period of relative outperformance ahead for the DAX versus the SMI due to the significantly different sector weighting which could propel the DAX further ahead in a growth normalization scenario," they add.

The strategists also point out that 43 percent of the DAX is made up of automakers, capital goods and basic materials companies which tend to outperform in an improving economic cycle, whereas the SMI is more "defensive" in nature with 58 percent of the SMI made up of food and beverage stocks.

In order to capture this possible outperformace, the Barclays strategists back buying a "call" option on the DAX due to expire on March 2014 while selling a similar March 2014 "call" on the SMI.

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Beta of European country indexes:

http://link.reuters.com/ryk67t

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Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net