There’s never been a bigger valuation gap between European and U.S. stocks, and that’s not the only reason why Deutsche Bank now says it prefers equities on the Continent on a tactical basis.

Deutsche Bank has turned "overweight" on European equities, the brokerage said on Tuesday, as a boost from lower interest rates and expectations of a strong corporate earnings season amid an improving political outlook were expected to bolster stocks.

European equities face a much brighter outlook in 2025 amid improving economic prospects and a low bar for corporate earnings after badly lagging US stocks last year, according to strategists at Deutsche Bank AG.

Deutsche Bank and Citigroup have turned bullish on European equities as lower interest rates, hopes of a strong corporate earnings season and an improving political outlook are expected to bolster sentiment in 2025.