HSBC Increases STOXX 600 and FTSE 100 Targets, Citing Strong Earnings Growth
HSBC's Upgraded Forecasts and Market Outlook
STOXX 600 Index Target Raised
Sept 23 (Reuters) - HSBC lifted its year-end target for Europe's STOXX 600 index for the first time this year on Wednesday, citing stronger earnings growth prospects, improving business sentiment and a healthier economic outlook.
The brokerage expects the index to reach 680 points by year-end from its previous forecast of 670, implying about 6.3% upside from current levels, and to reach 760 by the end of next year.
Optimism in European Equities
HSBC is the latest brokerage to turn more optimistic on European equities, as investors look past geopolitical risks and focus on the region's ability to withstand recent economic and energy shocks.
Recent data have also eased concerns that geopolitical tensions would significantly derail growth.
Earnings Growth Projections
London-based HSBC forecasts European earnings growth of 15.6% in 2026 and 15.4% in 2027.
Revenue Exposure and Currency Impact
The brokerage said European companies are becoming increasingly domestically focused, with regional revenue exposure rising to its highest level since 2017, somewhat shielding them from currency movements even as overseas sales still account for about half of revenue.
Currency Weakness as a Tailwind
A weakness of the euro and other European currencies against the US dollar could provide an additional tailwind for corporate profits, HSBC added.
Country-Specific Ratings and FTSE 100 Target
Italy and France Ratings Adjusted
The brokerage upgraded Italy to "overweight" from "neutral", citing lower reliance on Middle Eastern gas imports, while downgrading France to "underweight" on weaker economic forecasts and deteriorating consensus estimates.
FTSE 100 Index Target Raised
HSBC also raised its year-end target for Britain's FTSE 100 index to 11,390 from 10,980, implying nearly 6.5% upside from current levels.
(Reporting by Akriti Shah in Bengaluru; Editing by Harikrishnan Nair)
