Investing.com - The pan-European Stoxx 600 index has advanced by more than 9% so far this year, but the rally is showing signs of fading, according to analysts at Barclays.
In a note to clients, the analysts said equities in the region remain supported by rebounding economic activity and gradual disinflation, as well as "resilient" corporate earnings and low valuations.
But a range of factors, including slowing U.S. growth and stabilizing bond yields, suggest that "near-term fundamental upside" in European stocks "may be limited," the analysts argued.
"Equities are in a holding pattern near the highs, but price action feels tired," they said.
European stock markets edged higher Wednesday, rebounding after losses in the previous session, as investors awaited the European Central Bank’s latest policy meeting.
Persuaded by signs of moderating inflation in Europe, policymakers at the ECB have all but promised to ratchet down borrowing costs from record levels at the gathering on Thursday. However, it remains largely unclear how the central bank will approach any possible additional rate reductions later this year, particularly after data last week showed prices grew at a slightly faster-than-anticipated rate in the euro zone in May.