JPM Europe equity strategy: bullish on EU, Emerging Markets, Metals - Mining (Mislav Matejka)

Europe is smartly reversing its underperformance vs. the US from the early part of the year. Since May it is outperforming the US by 7% in local currency and 13% in common. We think there is more to go as:

1 - The sovereign stress is steadily diminishing.

2 - European activity remains very resilient.

3 - European financials are starting to outperform.

4 - European equities are cheap on 10.7x Fwd P/E.

We reiterate our recent re-entry into EM exposure and expect EM growth/inflation tradeoff to improve in H2. We think the first signs of a turn in Chinese policy stance towards being more market friendly are here. The 7-day repo rate has halved to 1.65% following RMB 915bn liquidity injection since May. We continue to see Metals&Mining as the main beneficiary of a lift in sentiment toward EM.