European equities could gain 5% on Clinton win, says Deutsche Bank

European equity markets could rise by around 5% if Democrat Hillary Clinton wins the US election, according to Deutsche Bank.

On the other hand, a win by Trump could prompt 5% to 10% downside for the benchmark Stoxx Europe 600 index, DB said in its latest equity strategy note.

“Given that Clinton’s policies are much less radical than Trump’s and have been communicated more consistently, we expect the current uncertainty premium to be removed from markets in case of a Clinton victory.

“A partial reversal of the 45-point increase in uncertainty currently being priced in, according to our P/E model, should lift the Stoxx 600 by around 5%.”

In terms of sectors, DB said European healthcare is likely to outperform in the event of a Trump win, given it has moved inversely to the probability of a Clinton victory over the past couple of months and has historically done well in periods of rising macro uncertainty and dollar strength.

Energy could come under pressure as a result of Trump’s plans to foster more US crude production and would also be at risk from a stronger dollar on a Trump victory, as could mining.

Meanwhile, DB recommended remaining cautious on banks if Trump wins, as a rise in uncertainty is typically associated with falling bond yields. However, a Clinton win could lead to a near-term rally in the sector.

“Historically, food and beverage, telecoms and healthcare have tended to outperform when US macro uncertainty rises, while insurance, banks and diversified financials have tended to underperform,” Deutsche said.