(Reuters) – Goldman Sachs expects the Stoxx 600 to rise 7.5% from current levels by the end of 2024, which would bring the pan-European stock index to 480 points, amid improving economic conditions , reasonable valuations and “roughly stable” prospects for long-term bond yields, the American investment bank wrote on Tuesday.

The Stoxx 600, rich in raw materials and luxury goods, has increased by 5% since the start of the year and ended Monday at 446.62 points. According to Goldman Sachs forecasts, at 480 points, this index would be at its highest level since January 2022.

Profits of companies making up the index are expected to rise 7% next year, thanks to “good” economic growth and high oil prices, according to a study by Goldman Sachs strategists and led by Sharon Bell.

These strategists expect the euro zone’s gross domestic product (GDP) to grow by 0.9% in 2024 compared to a forecast of growth of 0.5% this year.

The net profit margin of European companies could fall “slightly” in 2024, as wage growth remains high, warned Goldman Sachs.

The American bank added that it did not foresee a recession in the euro zone, saying it expected the European Central Bank (ECB) to reduce its interest rates in a disinflationary environment.

According to Goldman Sachs, share buybacks are expected to continue and mergers and acquisitions to intensify, thanks to high liquidity and low corporate debt ratios.

The intermediary raised its recommendation on the consumer products and services sector from “underweight” to “neutral”, believing that luxury stocks will likely remain supported by further stimulus measures in China.

The distribution and new technology sectors should also benefit from falling inflation and rising wages.

(Reporting Priyadarshini Basu, Claude Chendjou, editing by Kate Entringer)

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