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(Reuters) - Goldman Sachs cut its 12-month forecast for Europe's benchmark STOXX 600 index, citing the potential impact of U.S. President Donald Trump's tariff plans.
The Wall Street brokerage trimmed its forecast to 570 points from 580 earlier. The pan-European stock index last closed at 533.92 points on Monday.On Sunday, Trump said that his upcoming reciprocal tariffs would target all countries, shaking up financial markets amid fears of an impending economic slowdown.Goldman Sachs also lowered its forecast for European earnings per share, predicting growth of 2% in 2025 and 4% in 2026, down from its previous estimates of 4% and 6%, respectively, according to a note on Monday.
The brokerage, however, said the region is not likely to see larger impacts, thanks to increased fiscal and defensive spending plans over the next 2-3 years."We also continue to argue that Europe's relative discount to the U.S. provides some cushion (to the tariffs) and longer-term positioning in Europe is low", it added.
Goldman Sachs raised the probability of a U.S. recession to 35% from 20% on Monday and projected three interest rate cuts each this year from the U.S. Federal Reserve and the European Central Bank, from its previous expectation of two each."We find Cyclicals, (Germany's) DAX, MDAX and Nordic markets have the highest sensitivity to trade uncertainty and world trade growth, while defensive sectors, FTSE 100 and SMI (Swiss Market Index) have the lowest," the brokerage said.
It also raised its 12-month forecast for the UK's benchmark FTSE 100 index to 9,100 points from 9,000.
(Reporting by Joel Jose in Bengaluru; Editing by Rashmi Aich)
