Investors call peak pessimism, start bargain hunting
Europe weighed down by political turmoil, tariff threats
Potential German stimulus, China recovery seen as catalysts

LONDON, Dec 16 Reuters The year ahead is shaping up badly for Europe with its financial markets already hit hard by U.S. tariff fears and political turmoil in France and Germany, yet some investors are calling peak pessimism and hunting for bargains amid the gloom.

European stocks are set to underperform the U.S. by the most in at least 25 years, MSCI data showed, while the euro has slumped more than 5 against the dollar and some forecasters expect sustained bad news to drag it below 1.

But as the region39;s markets get cheaper, investors are increasingly interested in hunting for bargains, arguing that assets are fully priced for more disappointment and could rally strongly if the geopolitical and economic backdrop brightens.

We believe Europe could be a positive surprise for underexposed investors, said Edmond de Rothschild cohead of equities Caroline Gauthier. We are close to reaching a peak in negativity and that is good news.

A broad MSCI index of continental European stocks has gained 4.6 this year, while a comparable U.S. index surged 29 as artificial intelligence fever powered stunning gains for the tech titans that dominate Wall Street equity markets.

Valuation levels in Europe are now far more attractive, said Sonja Laud, CIO of Britain39;s biggest asset manager Legal General…