Goldman Sachs raises STOXX 600 target and moves European energy to underweight

what happened

According to Reuters, Goldman Sachs raised its 12-month forecast for the STOXX 600 on Friday, moving it to 700 points from 695. That implies roughly 5.42% upside from the current 664.01. The bank argues European shares stand to gain most from easing pressure on energy supply and prices.

Goldman now sees European earnings growth slowing to 7% in 2027, down from 18% in 2026. It points mainly to smaller energy profits, weaker growth and squeezed margins from costlier energy and higher rates. The energy sector was cut to underweight from neutral, while banks were moved to neutral and insurers to underweight, since both groups tend to track bond yields that the bank expects to fall.

Still, strategists led by Sharon Bell expect capital spending in Europe and globally to keep rising, with data centre buildouts remaining a strong driver of profits. Europe remains cheaper than the US, though the gap has narrowed. Inflows from US investors, mostly via global funds, continue to grow.

why it matters

The STOXX 600 has gained more than 12% so far this year, slightly ahead of the S&P 500's 10.9% rise. For markets, the case for Europe rests on expected lower bond yields and an easing energy shock, while the forecast slowdown in 2027 earnings limits upside.

market impact

European stocks: bank view ties index upside to easing energy costs and falling bond yields

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instruments