(Reuters) - Goldman Sachs cut its forecast for Europe's benchmark equity index STOXX 600 for the next 12 months, citing the persistently weak economic performance of the region and dull corporate earnings growth.
"Europe's problems are well recognized - low economic growth, high political uncertainty and a lack of decisive policy response" and would continue to weigh on the region's performance, Goldman Sachs analysts said in a note on Tuesday.
The brokerage, however, still sees "positive but low returns" for STOXX 600, and cut its forecast to 530 from 540 points. The benchmark European index last closed at 502.61 points.
The index has risen about 4.8% this year, compared with a 23.08% jump in its U.S. counterpart, the S&P 500 index.
Shortly before his U.S. presidential election victory, Trump had warned that the 27-nation bloc would have to "pay a big price" for not buying enough American exports, and EU officials say that his threats of 10% tariffs on all imports and 60% on those from China are credible and not just campaign rhetoric.
Goldman, however, sees a negligible impact on the index from Trump's tariffs as it expects the tariffs to be selectively applied.
It believes that a resolution to the war in Ukraine and a decisive policy from Europe are some key factors that could boost the index, but it remains skeptical of any near-term relief.
"But one area we do see support from is continued disinflation in Europe," Goldman added.
The brokerage also cut its forecast for UK's benchmark FTSE 100 index for the next 12 months to 8,500 from 8,800 points.
(Reporting by Gokul Pisharody in Bengaluru; Editing by Mrigank Dhaniwala and Shinjini Ganguli)
By Gokul Pisharody
