STOCKS NEWS EUROPE-UBS favours Europe vs U.S. as politics weigh

UBS (Berlin: UBRA.BE - news) sticks to its sizeable overweight on UK and European equities, while trimming exposure to U.S. stocks on a tactical view, citing high valuations and political turbulence.

"A high valuation of the U.S. relative to the rest of the world is quite reasonable given the mature and self-sustaining state of the U.S. recovery. And yet it seems that political dysfunction may be a headwind for the U.S. in the near future, and after a very strong equity rally we think the upside for U.S. equity is limited," UBS global investment strategists write in a note.

"On a relative basis therefore, while we still prefer developed markets to emerging markets strategically, we think it is advisable to tactically trim our over-weight to U.S. equity and add a small EM over-weight."

That reduces its U.S. allocation to 25.5 percent from 26.0 percent and relative to a benchmark of 24.5 percent.

Europe and UK, meanwhile, both remain on 150 basis point overweights relative to their benchmarks, at 8.5 and 4.5 percent, respectively.

Reuters messaging rm://antonina.vorobyova.thomsonreuters.com@reuters.net