European equity markets, which have rallied since the start of 2013 with Germany's DAX (Xetra: ^GDAXI - news) reaching record highs, are unlikely to have more sustained advances in the near term and may retreat by June, UBS (Xetra: UB0BL6 - news) technical analysts write in a research note.
"With the continued rally in cyclicals and financials, we saw new breakouts across the board in core Europe. However, relative to the U.S. the underlying picture in Europe remains less trending and after the recent exhaustive moves, we do not favour sustainable and longer lasting breakouts," write UBS analysts Michael Riesner and Marc Muller.
"From a cyclical perspective, we expect a later May top forming followed by a significant setback into initially June/July," they add.
The UBS analysts see the euro zone's blue-chip Euro STOXX 50 (Zurich: ^STOXX50E - news) index , which is up 0.2 percent at 2,802.33 points On Wednesday, as having its upside capped from the 2,800-2,868 point level.
They add that any decline in the Euro STOXX 50 which pushes the index down below the 2,754 point level "would be initially negative and indicate that a short-term top building process has started."
The Euro STOXX 50 has risen around 6 percent since the start of 2013, while the DAX has risen some 10 percent and has hit record highs this month.
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