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STOCKS NEWS EUROPE-'Now's the time' to go bullish:Dt Bank note

Buy European financials, buy highly-leveraged high yield, buy domestic exposure and sell exposure to low risk, Deutsche Bank strategists say in a bullish note.

"Now's the time," they write, saying that they are returning to being tactically 'overweight' on the STOXX 600 .

"By our estimates a fair-value forward price-to-earnings ratio for the STOXX 600 should be 12.5 times. The market is currently trading at 11 times forward, and we believe this excess risk premium is a function of sovereign risk," they write.

"The leading indicator for this recovery could be Italy. Credit growth has fallen faster in Italy, but lending standards appear to be stabilizing. The Italian economy has destocked aggressively, and the synchronized slowdown in the pace of deleveraging and the pace of destocking could put the Italian economy back on the road to growth. And where the Italian economy goes, we believe the euro area economy will follow."

The strategists upgrade banks and insurance to 'overweight', and downgrade food and beverages and healthcare to 'underweight'.

They also upgrade telecoms to 'overweight', saying that "a narrowing in sovereign CDS (credit default swaps) should also help precipitate a preference for companies with high debt, plus a turn in growth should help to reduce the number of dividend cuts."

Reuters Messaging: blaise.robinson.thomsonreuters.com@reuters.net

Keywords: MARKETS EUROPE STOCKSNEWS