(Rewrites throughout) Oct 6 (Reuters) – J.P. Morgan upgraded its stance on the euro zone to "overweight" from "neutral" on Monday, noting that the equities in the region have become more attractive after several months of underperformance and policy support. "The time is coming up to turn bullish on Eurozone equities," J.P. Morgan strategists, led by Mislav Matejka said. Euro Stoxx 50 has trailed the S&P 500 by nearly 18% since a strong first-quarter rally, but this relative underperformance could be used as a buying opportunity, Matejka said. The strategists noted that with relatively cheaper valuations than their U.S. counterparts, and potential catalysts such as German stimulus, and improving euro zone credit impulse, could renew sentiment in the region. The 15% tariff on European Union goods has also put to rest one of the major overhangs on the region's equities, J.P. Morgan said. The brokerage retained its positive stance on European defense stocks, as it expects capital expenditure to be constructive and boost parts of industrials, construction materials and utilities. While the uncertainty in France could create an overhang, Matejka said, "We would use the weakness to buy, as we believe that any pressure will not be long-lasting." The potential uptick in earnings and rise in share buybacks could also help underpin the euro zone's more optimistic outlook heading into next year. The Wall Street brokerage reiterated its year-end target of 5,800 for the Euro Stoxx 50. The index is up 10.4% year-to-date, according LSEG data. (Reporting by Kanchana Chakravarty in Bengaluru; Editing by Mrigank Dhaniwala and Eileen Soreng)
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