Buy Europe's Stock Dip, Then Sell It Quick, Citigroup Says

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Is There a Relief Rally Around the Corner?

Investors should buy European stocks after recent lows and ride a rebound of as much as 5 percent before cashing in, says Citigroup Inc.’s Antonin Jullier.

Markets are still trying to figure out what the global macro backdrop looks like and how corporate earnings will fare, Jullier, the bank’s global head of equity trading strategy, said in an interview in London today. A larger, longer rebound is only in the cards if China’s central bank does takes major action to support markets before the country’s New Year holiday next month, he said.

Stock returns are likely to improve following this year’s turbulent start, Citigroup strategists say. While they lowered their 2016 targets for European indexes after last week’s rout, they still predict gains of about 15 percent for the Stoxx Europe 600 Index by the end of December, according to a Jan. 8 note.

In a separate interview on Bloomberg Television today, Jullier said investors are also awaiting clarity from central banks in Europe, the U.S. and Japan.

“These are questions which need to be answered to allow risk appetite to come back to some extent,” he told Francine Lacqua. “And earnings, that’s the other pillar of the equity market. Expectations have collapsed in the last three months. It’s a low hurdle to beat, therefore that could provide a bit of an underpin to the market -- U.S. and then very closely followed by Europe.”

— With assistance by Francine Lacqua

(Updates with index targets in last paragraph.)
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