Europe has been one of the brightest spots in global stock markets this year, with the benchmark Stoxx 600 up around 7% since the start of 2023 – a shade better than the S&P 500’s return of 5% over the same period. And Wall Street is calling Europe a better bet than the US right now. “We are tactically overweight Europe versus the US. Europe is facing difficult growth/policy tradeoff and the war in Ukraine has not ended, but some of the structural and cyclical headwinds are turning around favorably, reducing somewhat the downside risk for earnings,” Barclays’ strategist Emmanuel Cau, wrote in a note on January 20. “The region also remains cheap and in-owned unlike the US” In the middle of this bullishness in Europe, however, some investment banks have named shares in the region they think investors should. avoid. Underweight stocks One such stock is Danish shipping company Maersk, which is on Barclays’ list of underweight stocks for the first quarter of 2023. The bank said Maersk is entering a period of “significant earnings volatility” with a negative earnings outlook. Barclays’ forecast for the company’s earnings before interest, tax, depreciation and amortization (EBITDA) in 2024 is 15% below consensus. Swedish industrial company SKF also made the Barclays list. “We expect stocks to underperform as [purchasing managers’ indexes] continues to deteriorate, consistent with historical patterns,” wrote analyst Lars Brorson in a note on January 20. The bank said prices for SKF’s products, which include rolling bearings and industrial seals, continue to lag” persistent “cost headwinds, and its planned portfolio. transformation is likely to take years – not quarters. Barclays’ price target of 140 Swedish Krona ($ 13.50) in the stock suggests that the stock has a potential downside of almost 25% to its January 30 closing price. ‘High conviction’ selling UBS also has “Capital goods , which is one of the most favored sectors, there are many on the sell list,” said UBS associate strategist, Sutanya Chedda, in a note on January 26. space, the bank is bearish on the British company Bunz. He said the distribution company will see a fall in profits and margin pressure into 2024 given expected price deflation and customer budget pressures. UBS has a £24 ($29.60) price target on the stock, which shows potential al downside around 19%. Swedish mining equipment maker Epiroc is being sold by UBS, with the bank predicting a decline in mining equipment orders this year due to falling commodity prices, an uncertain macro environment and lower industrial activity. The bank gave a price target of 145 Swedish Krona on the stock, which represents a potential loss of 30%. Automaker Volvo is also one of UBS’s selling calls. The bank had forecast margins and orders lower than consensus. “We believe that with the already large backlog, Volvo will need to increase production to convert deliveries into sales (subject to supply chain constraints) but this may be due to margin costs, with management hinting at the first 3Q22 results. that from the summer holidays, Volvo has seen a growing need to support suppliers financially due to rising energy prices,” the bank said. – CNBC’s Michael Bloom contributed reporting