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Oct. 1, 2019, 7:38 a.m. EDT

Bank of America says European stocks should climb as market starts quarter lower

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By Steve Goldstein, MarketWatch


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Bank of America Merrill Lynch is recommending investors buy European airlines.

European stocks on Tuesday declined, as a key brokerage expects an upturn in the economy that will lift equities in the region.

The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.09%  fell 0.35% to 391.76. Defensive stocks like food maker Nestle /zigman2/quotes/208115528/delayed CH:NESN -0.14%  and drugmaker Roche /zigman2/quotes/206324342/delayed CH:ROG -0.60%   declined.

The German DAX /zigman2/quotes/210597999/delayed DX:DAX +0.46%  declined 0.17% to 12407.40, the French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.59%  fell 0.26% to 5663.07 and the U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.10%  declined 0.42% to 7377.14.

U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +0.14%  were higher after a 96-point gain for the Dow industrials /zigman2/quotes/210598065/realtime DJIA +0.01%   on Monday.

Data released Tuesday showed the final reading of eurozone manufacturing PMI in September at its lowest level in seven years. Inflation also unexpectedly declined, to just 0.9% year-over-year, more than a full point below the European Central Bank’s target.

Strategists at Bank of America Merrill Lynch say the Stoxx 600 can reach 415 by March, and that it expects cyclicals to outperform defenses by 5%.

It expects eurozone PMI momentum — defined as the six-month change in the new orders component of manufacturing and services data — to return to positive territory in the near term and remain there.

Like J.P. Morgan on Monday, the strategists noted the rise in eurozone money supply, and the Bank of America team also the risk of a U.S. recession remain low.

The Bank of America strategists say European airlines XX:156977 +0.36%   in particular are priced for an outright eurozone recession.

Ryanair /zigman2/quotes/205429530/delayed IE:RY4C +3.38%  climbed 3.3% and Air France-KLM /zigman2/quotes/205396176/delayed FR:AF +1.20%  rose 2.4%.

/zigman2/quotes/210599654/delayed
XX : STOXX
412.02
+4.44 +1.09%
Volume: 0.00
Dec. 13, 2019 5:50p
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/zigman2/quotes/208115528/delayed
CH : Switzerland: SWX
CHF 102.94
-0.14 -0.14%
Volume: 5.11M
Dec. 13, 2019 5:30p
P/E Ratio
33.02
Dividend Yield
2.38%
Market Cap
CHF297.64 billion
Rev. per Employee
CHF296,880
loading...
/zigman2/quotes/206324342/delayed
CH : Switzerland: SWX
CHF 300.55
-1.80 -0.60%
Volume: 1.48M
Dec. 13, 2019 5:30p
P/E Ratio
21.96
Dividend Yield
2.89%
Market Cap
CHF258.83 billion
Rev. per Employee
CHF601,914
loading...
/zigman2/quotes/210597999/delayed
DAX
DX : Xetra Indices
13,282.72
+61.08 +0.46%
Volume: 106,137
Dec. 13, 2019 6:30p
loading...
/zigman2/quotes/210597958/delayed
FR : France: Euronext Paris
5,919.02
+34.76 +0.59%
Volume: 113,199
Dec. 13, 2019 6:05p
loading...
/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,353.44
+79.97 +1.10%
Volume: 1.85M
Dec. 13, 2019 4:59p
loading...
/zigman2/quotes/209948968/delayed
US : U.S.: CME
$ 3,175.50
+4.50 +0.14%
Volume: 2.04M
Dec. 13, 2019 4:00p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
28,135.38
+3.33 +0.01%
Volume: 254.81M
Dec. 13, 2019 5:14p
loading...
XX : STOXX
371.81
+1.32 +0.36%
Volume:
Dec. 12, 2019 12:00a
loading...
/zigman2/quotes/205429530/delayed
IE : Ireland: Dublin
14.37
+0.47 +3.38%
Volume: 3.45M
Dec. 13, 2019 4:32p
P/E Ratio
18.19
Dividend Yield
N/A
Market Cap
€15.38 billion
Rev. per Employee
€530,769
loading...
/zigman2/quotes/205396176/delayed
FR : France: Euronext Paris
10.58
+0.13 +1.20%
Volume: 3.31M
Dec. 13, 2019 5:37p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
€4.47 billion
Rev. per Employee
€328,953
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Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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