Citigroup cuts end-2016 FTSE, Stoxx targets

Citigroup downgraded its end-2016 targets for the Stoxx 600 and the FTSE 100, pointing to modest downgrades to GDP growth forecasts, additional stress in commodities and volatility in key FX markets.

The bank noted some sharp moves across financial markets already in 2016, with a continuation of trends from late 2015.

It highlighted renminbi depreciation and the fall in oil prices, which have combined to drive contagion across risk assets.

“There has been nowhere to hide in equities.”

Barclays cut its FTSE 100 target to 6,600 from 7,100 and its Stoxx target to 400 from 440.

“We still think that equity returns will be driven by modest growth and some re-rating over the coming 12 months,” said Citi, which cut its top-down expectations for 2016-17 European earnings growth to 4-7%.

In its latest European portfolio strategist note, the bank stuck to its key investment themes, recommending that investors align with fundamentals, liquidity and balance sheets.

“We continue to see equity returns driven by a combination of modest growth and modest re-rating, although in the case of the UK it is modest dividend growth that is perhaps more likely than EPS growth this year in the face of further commodity price collapse.”