Credit Suisse downgrades European equities

Credit Suisse global equity strategists downgraded continental European equities to underweight on Wednesday, saying valuations in Europe were not cheap and Italian political risk was unlikely to dissipate. European equities are trading on the same sector-adjusted price-to-earnings as US equities, not adequately pricing in the risks from a weak Italian economy and friction between its new government and Europe, Credit Suisse said.
"Continental European equities are pricing in just a 15 percent probability of a eurozone crisis, compared with the 32 percent probability being priced in by the BTP/Bund spread," the strategists wrote in a note. They calculated this probability by comparing both the current spread and the high reached during the Greek crisis to the post-crisis low.