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Citigroup analysts turned “underweight” on U.S. equities on recession fears but were bullish on European stocks, saying much of the pessimism was already priced-in.

The U.S. bank upgraded its view on continental European equities to “overweight.”

More broadly, it expects earnings per share for stocks in the MSCI All Country World index to contract by 5-10% over the year.

The index, which was last trading at 606, could end 2023 towards the higher end of a 680-780 points range, Citi said in a research note.

For 2023, the bank favors defensive sectors such as healthcare and cheaper cyclicals including energy and financials over more expensive technology and consumer discretionary names.

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