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STOCKS NEWS EUROPE-UBS raises Europe to "overweight", cuts U.S.

Reuters - UK Focus

UBS (Berlin: UBRA.BE - news) equity strategists upgrade their position on continental European equities to "overweight" from "neutral" and cut their stance on U.S. equities to "neutral", saying Europe looks better placed in the near term as its economy slowly recovers.

UBS highlights in a note that European macroeconomic data "continues to surprise on the upside, the fiscal drag is dissipating and imbalances are normalising."

"We still see the U.S. economy growing more quickly than Europe in 2013 and 2014, but there are finally signs that momentum may be turning in Europe," adds the UBS team.

"Given the depressed nature of European earnings in relation to the U.S, there is more 'bang for your buck' in terms of a recovery in European macro."

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UBS recommends that investors buy stocks with the greatest exposure to the euro zone, highlighting a wide variety of stocks including banks such as SocGen (Paris: FR0000130809 - news) and BNP Paribas (Milan: BNP.MI - news) , utility groups such as Enel (Milan: ENEL.MI - news) and Snam (Milan: SRG.MI - news) and telecom companies such as KPN (Amsterdam: KPN.AS - news) and Iliad (Paris: FR0004035913 - news) .

On a global equity allocation basis, UBS is "overweight" on the financials, technology and healthcare sectors, and "underweight" on consumer staples, telecoms and consumer discretionary stocks.

UBS' bullishness on Europe is also echoed by Nomura strategists, who back a positive "risk-on" stance towards Europe and also favour buying domestic European shares.

So far this year, gains on the European equity markets have lagged the U.S. stock markets.

The pan-European FTSEurofirst 300 index has risen 5 percent since the start of 2013 while the euro zone's blue-chip Euro STOXX 50 (Zurich: ^STOXX50E - news) index has risen around 3 percent - less than a 13 percent rise on the Dow Jones Industrial Average and a 14.5 percent rise on the S&P 500 index .

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