STOCKS NEWS EUROPE-Citi favours earnings momentum style

Citi's quants team recommends betting on continued gains in European equities through companies with a strong earnings momentum, and cautions against the riskier value style which focuses on snapping up the cheapest stocks.

As European equities rallied last month on the back of fresh stimulus announcements from the ECB and the U.S. Federal Reserve, the risk-on strategies of earnings momentum and value performed well while the more cautious bets on low risk companies and quality lost money, according to Citi data.

"We see further opportunity for a longer-term fundamental focus but remain cautious over exposure to upside risk and macro dominated styles," Citi's quants team writes in a note.

"We see further opportunity within Estimates Momentum, as do our strategists, and remain cautious over exposure to the more volatile value/momentum."

The earnings momentum style, which picks companies with an improving profits outlook and tracks changes in analysts' forecasts, has been the best performer year-to-date, with gains of around 8 percent.

According to Thomson Reuters Starmine data, healthcare and IT are the only two sectors in the pan-European STOXX 600 index to have seen upward revisions to analysts' fourth quarter earnings estimates in the past 30 days. Utilities, meanwhile, have seen the steepest downgrades.

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