Goldman Sachs (NYSE:GS) has nudged its target for the STOXX Europe 600 index higher, but trimmed its outlook for the FTSE 100 as it begins to price in earlier expectations for rate cuts in Europe.
The investment bank now expects the first European Central Bank rate cut in April 2024 and the first Bank of England rate reduction in August.
Much of this has already been priced in the bank said, what with European equities up 10% since October.
In the UK, Goldman has lowered its 3-, 6- and 12-month targets for the FTSE 100 to 7600, 7700 and 7900 (from 7700, 7800 and 7900).
In Europe, it has a more positive view and has raised its STOXX Europe 3-, 6- and 12-month targets to 470, 480 and 500 (from 450, 460 and 480.
“This provides a 7% price return over 12 months but is flat over 3 months, reflecting the bounce we have already seen,” it said.
In Europe, Goldman has taken banks down to neutral given that rates will be declining.
In the UK, it has removed the short recommendation on UK Real Estate.
Goldman has also revised its forecasts for the pound raising to $1.25, $1.30 and $1.30 in 3, 6 and 12 months (from $1.18, $1.20 and $1.25 previously.
The bank said the British currency will benefit from the BoE starting its easing cycle later than the Federal Reserve and the ECB, which are expected to cut rates in the first half of the year.
“If the BoE sticks with its ‘tabletop’ approach even if its peers are moving to earlier cuts, this should support sterling, especially if it is in a context of a global move towards ‘adjustment’ cuts that are also generally supportive for risk sentiment,” Goldman said.