Jan 7 Reuters Deutsche Bank has turned overweight on European equities, the brokerage said on Tuesday, as a boost from lower interest rates and expectations of a strong corporate earnings season amid an improving political outlook were expected to bolster stocks.

Lower rates and higher earnings yields make Europe the region with the most attractive equity risk premium among developed markets, Deutsche Bank analysts wrote in a note.

European equities came under pressure last year as investors worried about an uncertain political landscape and the impact of U.S. Presidentelect Donald Trump39;s tariff policies on the region39;s economy.

Europe39;s STOXX 600 index gained only 6 last year, widely lagging a more than 20 rise in its U.S. counterpart, the SP 500 index.

For the current year, however, the brokerage expects the European benchmark index to hit 590 points by the end of 2025, implying a 15 upside to its Monday close of 513.02 points.

Economic surprises continue to improve, political uncertainty is fading … and potential Chinese stimulus announcements in Q1 add upside risk, Deutsche Bank analysts said.

The stronger USD is another tailwind for European earnings and should compensate for the negative effect from potential US tariffs, the analysts said.

On the sector front, the brokerage turned overweight on the European healthcare sector, citing the potential for solid earnings growth and a strong negative correlation to rates.

Reporting by Kanchana…