Citigroup has established a mid-2027 price objective of 700 for Europe’s Stoxx 600 index, a level that represents about an 11% gain from prevailing market levels, and kept its target for the end of 2026 at 640. The bank’s strategists attribute their relatively upbeat stance to expectations of robust earnings growth across the region.
“We remain constructive on European equities to mid-27, supported by solid EPS growth. Macro headwinds are building (via energy prices, rate hikes) and Europe is less geared to the global AI trade,” the strategists wrote in their report. They also flagged that current positioning in the market remains light, reiterated that the argument for holding global equities continues to be strong, and said that fiscal policy tailwinds should encourage longer-term diversification into European stocks.
On earnings, Citi raised its top-down earnings-per-share forecast for the Stoxx 600 to 12% for 2026, up from its previous 8% estimate. That upgraded projection still sits below the bottom-up consensus, which Citi notes is at 16% for 2026. The bulk of the upward revision came from the energy sector, where analysts pushed earnings estimates sharply higher following a supply shock. For 2027, Citi foresees EPS growth of 10%, a pace it describes as broadly in line with consensus expectations.
Valuation metrics, the bank says, should remain relatively steady. The Stoxx 600 is trading at about 14 times 12-month forward earnings, close to its 15-year median, and Citi expects EPS to expand at a double-digit rate in both 2026 and 2027.
Citi outlines three principal themes that underpin its outlook. First, the conflict involving Iran has prompted the bank’s economists to lower their 2026 eurozone GDP growth forecast to 0.7% and to raise inflation expectations, a combination that now leads Citi to anticipate two ECB rate hikes this summer.
Second, technology has been a key driver of concentrated market returns, and Citi suggests that AI adoption could become a material theme in Europe. “At a global level, fundamentals appear aligned behind continued narrowing. AI adoption could be meaningful in Europe,” the strategists said, noting the potential for technology-led narrowing in returns.
The third theme is fiscal policy: Germany’s spending plans together with wider eurozone stimulus are expected by Citi to add an incremental 2-3 percentage points to regional EPS growth each year over the next five years.
On sector positioning, Citi describes its approach as balanced. The bank is overweight technology, banks, basic resources, healthcare and personal goods. It downgraded industrials to neutral on the basis of demanding valuations, and shifted travel and leisure and financial services to underweight. Citi also remains underweight in luxury goods, autos, telecoms and utilities.
For the U.K., Citi put a mid-2027 target of 11,800 on the FTSE 100, a level that implies roughly 15% upside from current readings. The bank projects FTSE 100 EPS growth of 22% in 2026 and 9% in 2027.
Context and takeaways - Citi’s revised top-down EPS outlook and the reweighting of sector preferences reflect a view that near-term macro pressure from higher energy prices and rate moves is manageable relative to the earnings momentum it expects, particularly once fiscal stimulus effects are factored in. The bank’s call balances the recognition of mounting macro risks with an earnings-driven case for modest upside to European indices over the next 18 months.