STOCKS | Citi Says Policy Shift Could Support European Stocks

Citi said Europe’s policy response to rising U.S. trade protectionism has advanced more than the market recognizes, while European stocks have not fully reflected the benefit. According to Sina Finance, a team of analysts led by Sebastian Sazt wrote that, in addition to procurement preferences, local-content requirements, and risk-resilience safeguards, stronger trade-protection tools are likely to be introduced in strategic industries. The report said the policies are expected to benefit steel, chemicals, industrial manufacturing, and autos, while a broader investment cycle could support defense, utilities, and strategic technology companies. It listed ArcelorMittal, Volkswagen, Renault, Lanxess, and BASF as beneficiaries of protected policies, and said strategic resilience investment would support Leonardo, Rheinmetall, Thales, Vestas, Schneider Electric, EDP, Orsted, TotalEnergies, ASML, BE Semiconductor, and ASM International. Citi strategists also said Europe’s shift toward fiscal expansion, deregulation, and strategic autonomy is building a more sustainable domestic growth engine, accelerating earnings, expanding margins, and improving capital inflows. The report said earnings upgrades are only partly reflected in valuations, and European stocks remain underweight among institutions. It added that as investors increasingly view European equities as a strategic allocation rather than a short-term trading vehicle, the sector still has room for further valuation gains.