TLDR
- HSBC has increased its STOXX 600 year-end 2026 forecast to 680, up from 670.
- The revised projection suggests potential gains of approximately 6% to 7% from present levels.
- The bank anticipates the benchmark will climb to 760 by December 2027, representing nearly 20% growth.
- European corporate earnings are projected to expand by more than 15% annually in 2026 and 2027.
- Italy received an upgrade to overweight, while France was downgraded to underweight.
HSBC has increased its forecast for Europe’s STOXX 600 index for the first time this year, pointing to enhanced corporate profitability, strengthening business confidence and an improved economic landscape.
The financial institution now projects the regional benchmark will hit 680 by year-end 2026, an upward revision from its prior 670 estimate. According to Reuters, this represents approximately 6.3% potential appreciation from current trading levels, with HSBC forecasting a further advance to 760 by the conclusion of 2027.
Corporate Profitability Trajectory Strengthens
HSBC anticipates European corporate earnings will expand by 15.6% in 2026, followed by 15.4% growth in 2027. The bank’s updated analytical framework incorporates adjustments to earnings-per-share projections, gross domestic product estimates, business sentiment indicators and valuation metrics.
The institution also noted a notable transformation in revenue sources for European corporations. Domestic market exposure has climbed to 51.2%, marking the highest concentration since 2017, though international markets still account for roughly 49% of total sales.
This geographic revenue split means corporate profitability remains vulnerable to foreign exchange fluctuations. HSBC calculates that a 5% depreciation in European currencies relative to the U.S. dollar could boost regional EPS growth by approximately 3.1 percentage points during 2026.
Recent trading activity has also bolstered optimism surrounding European equities. The STOXX 600 gained 1% on Monday, propelled by advances in technology and financial services stocks, while declining crude prices alleviated concerns regarding inflation and energy expenses.
Italy Gets Upgrade While France Faces Downgrade
HSBC maintained its broader sector positioning but elevated Italy to an overweight rating from neutral. The upgrade reflects more robust GDP projections, accelerating earnings trends and reduced dependency on Middle Eastern natural gas and liquefied natural gas imports.
France received a downgrade to underweight due to softer economic forecasts, declining analyst sentiment and ongoing challenges facing consumer discretionary businesses.
HSBC also expressed optimism regarding UK mid-capitalization equities. The FTSE 250 continues trading approximately 25% below its ten-year average on a forward price-to-book valuation basis, notwithstanding its recent recovery.
The bank projects FTSE 250 earnings will increase by 14% in 2027, compared with just 5% for the FTSE 100, benefiting from greater exposure to the recovering domestic British economy. HSBC also raised its FTSE 100 year-end target to 11,390 from the previous 10,980 level.
HSBC’s projections represent analytical forecasts rather than assured outcomes, as European equity markets remain subject to currency volatility, energy price movements, geopolitical uncertainties and fluctuations in economic expansion.
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