e e Eurozone equities Preference: underweight | Euro Stoxx (27 June): 217 (last month: 215) | Recommendations UBS View Euro Stoxx (6-month target): 223 Tactical (6 months) ¢ The crisis in the Eurozone will remain the main driver in the coming months. After the elections in ¢ We continue to recommend defensive Greece, progress on the reform program will be closely monitored. Spain and Italy will also remain in the sectors. We like Consumer Staples and spotlight with levels of government bond yields too high for being sustainable. Healthcare. ¢ With the sovereign debt crisis dragging on we expect the Eurozone market to stay highly volatile in Me also like the Energy Sectcr, where the coming months. valuation is very attractive. . ; . ; ; ; e Because of risks stemming from the e Economies in peripheral countries increasingly feel the burden of austerity. The economic weakness sovereign debt crisis, we keep a cautious affects company earnings negatively. Analysts’ earnings growth forecasts (consensus) for 2012 have come stance on Financials - especially Banks down to about 3% for this year, but we see this as still too high against the weak economic backdrop. and diversified Financials. ¢ Allin all, the ongoing risks stemming from the sovereign debt crisis lead us to the view that Eurozone . equities will underperform other major markets. Strategic (1 to 2 years) . . e For investors with a multiyear horizon, 4 Positive scenario Euro Stoxx (6-month target): 275 we believe there are attractively valued ; } ; opportunities in core Europe (see also ¢ Global economic growth reaccelerates and Eurozone growth shows clear signs of bottoming out, slide 21). enabling 2-4% earnings growth over the rest of the year. The trailing P/E ratio could re-rate to 12x from the current reading close to 10x. Our sector stance in the Eurozone & Negative scenario Euro Stoxx (6-month target): 165 sector — ¢ Europe slides into a deep recession, and the debt crisis leads to severe pressure on Spai