Goldman sees FTSE 100 hitting 9,000 on potential Ukraine peace deal

(Sharecast News) - Goldman Sachs has hiked its price forecasts for the pan-European Stoxx 600 and London's FTSE 100 on the back of a potential peace deal for Ukraine, predicting that the UK index could hit the 9,000 level within 12 months.

The speculation comes after US president Donald Trump said he would start negotiating with Vladimir Putin regarding a potential end to the Russia-Ukraine war, which began escalating in early 2022. Betting market odds of a ceasefire this year have risen to 70%, Goldman noted.

The bank predicts a "modest" re-rating of European equities if a deal with Russia is struck, but highlighted that the outcome of peace talks is still uncertain and earnings prospects for Europe have not materially improved regardless.

"Since Russia's full-scale invasion of Ukraine in February 2022, the STOXX 600 has underperformed S&P 500 and MSCI World by 13% and 6% respectively. Flows into European equities have also been consistently weak since the war began, with outflows in almost every week since the February 2022 invasion," Goldman said in a research note on Friday.

The impact of a potential peace deal for European equities would be lower risk premiums, lower energy prices, better consumer confidence and stronger economic growth, Goldman said, estimating that European GDP should increase by 0.2% in a limited ceasefire scenario and by 0.5% in an upside scenario.

The bank has lifted its three-month, six-month and 12-month price forecasts for the Stoxx 600 to 560, 570 and 580, respectively, up 40 points from previous estimates.

Three-month, six-month and 12-month price forecasts for the FTSE 100 have all risen by 400 points to 8,800, 8,900 and 9,000, respectively.