Beata Manthey, head of European equity strategy at Citigroup Global Markets Ltd., suggests that European stock markets could experience an additional 5% rise by the close of the year. This optimistic outlook is primarily fueled by what she describes as an "explosion of earnings" from the most recent reporting season, particularly benefiting the segments of the market that are significantly impacting the overall index level. She highlighted that these earnings are performing robustly, mitigating perceived risks.
Manthey's positive stance is reinforced by a broader constructive outlook on European equities for 2026, which she detailed in a December 2025 podcast. Citi analysts forecast a Stoxx 600 target of 640 by the end of 2026, representing a solid 10% upside from current levels, assuming stable multiples around a 12-month forward P/E of 15x. The FTSE 100 is also targeted for 10,700, indicating similar upside potential. This confidence stems from cyclical improvements, structural shifts, and fiscal tailwinds, including an anticipated 1.2% Eurozone GDP growth for next year, above current consensus, and a supportive stance from the Federal Reserve with continued rate cuts amid resilient growth and contained inflation.
A key driver for this positive forecast is the expected recovery and broadening of Earnings Per Share (EPS). After a relatively flat 2025, bottom-up analysts project a robust 11% EPS growth for European equities in 2026, with widespread sector contributions. Citi's top-down forecast also points to a healthy 8% EPS growth. This broadening of EPS is crucial as previous downgrades in European equities were largely driven by internationally exposed stocks facing headwinds like tariffs and currency strength, which are now easing. Furthermore, fiscal revival, particularly the acceleration of NextGenerationEU (NGEU) spending, is expected to provide significant stimulus, with Germany alone projected to see a GDP boost of almost 1%.
