Citi stays bullish on European equities going into 2016

European equities were set to deliver a strong return in 2016, benefiting from three macroeconomic tailwinds: Divergence, Mario Draghi and the US Dollar, Citi said.

In a research note sent on 3 December, analyst Jonathan Stubbs estimated an approximate total return of 20% for the asset class to the end of 2016.

"Citi’s economists expect another year of sub-par but non-recessionary growth, with key risks from slower China/EM growth, (geo) politics, market liquidity and credit," Stubbs said.

That did not mean European stocks were 'cheap' - nor 'expensive' - he pointed out, but rather "attractive" relative to other asset classes.

He also forecast earnings per share would grow by between 8-10%, advising investors align with fundamentals, liquidity and balance sheets.

"We favour value-adjusted delivery and our four Planet QE strategies: 1) nominal GDP growth put, 2) search for reasonable/secure yield, 3) de-equitisation, 4) FX kickers. We prefer domestic cyclicals and Financials over EM cyclicals and Defensives," the analyst concluded.