Feb 15 (Reuters) - Goldman Sachs on Thursday raised its 2024 target for Europe's benchmark equity index, citing improving economic activity, a potential decline in interest rates and attractive valuation.
The Wall-Street brokerage increased its forecast for the STOXX 600 index (.STOXX), opens new tab to 510 from its previous estimate of 500.
Recent economic data showed a moderation in the downturn of the euro zone's manufacturing activity and a decline in consumer prices amid ongoing discussions among global central banks, including the European Central Bank (ECB), about the potential for rate cuts.
"With tight labour markets across Europe, we expect wages to remain stickier and higher than inflation this year, and for households to benefit from positive real income growth and falling interest rates," Goldman strategists said in a note.
A fall in energy prices, coupled with abundant gas supply, will benefit Europe, which is an energy-importer, the brokerage added.
The benchmark index has risen 13% since hitting a low in late October and has gained about 2% so far this year.
The STOXX 600 trades at about 14 times its one-year forward price-to-earnings (PE) ratio, while the S&P 500 index (.SPX), opens new tab trades at 25 times its one-year forward PE ratio, according to LSEG data. A lower PE multiple indicates a more attractive investment opportunity.
Goldman also revised its recommendations for a slew of European sub-sectors.
The brokerage downgraded the European energy sector (.SXEP), opens new tab to "neutral" from "overweight" and utilities index (.SX6P), opens new tab to "underweight" from "neutral" on falling energy prices.
The video player is currently playing an ad. You can skip the ad in 5 sec with a mouse or keyboard
In contrast, it upgraded the industrial goods and services sector (.SXNP), opens new tab and construction and building materials sub-index (.SXOP), opens new tab on improved demand and lower energy costs.
Goldman also upgraded the travel and leisure stock index (.SXTP), opens new tab to "overweight" from "neutral," citing benefits from a fall in consumer prices, reduced borrowing costs and wage stability.
Reporting by Siddarth S and Priyadarshini Basu in Bengaluru; Editing by Sohini Goswami and Dhanya Ann Thop
