Goldman Sachs raised its 12-month STOXX 600 target to 625 from 615 ‍on Tuesday, citing ‍stronger global growth, improved corporate earnings and attractive valuations, a ​day after the index crossed the 600 level for the first time.

The ⁠Wall Street brokerage's target implies a 3.86% upside to the pan-European ⁠index's last ‌close of 601.76 on Monday. 

"Valuation is supported by strong global growth and falling interest rates in the ⁠U.S.," Goldman said.

The STOXX 600's 12-month forward price-to-earnings ratio stands at 18.02, relatively cheaper to the S&P 500 index's 28.16.

The brokerage also pointed to renewed interest from U.S.-based investors ⁠looking to diversify portfolios ​globally, with Europe seen as a key value opportunity.

Positioning in European equities remains light ‍following persistent selling between 2022 and 2024, leaving scope for incremental inflows, it ​added.

Goldman predicts earnings-per-share (EPS) for the index at 5% and 7% in 2026 and 2027 respectively. However, the brokerage cautioned that continued weakness in the dollar will remain a headwind.

Additionally, it said 2026 would be a strong one for European small-cap stocks, betting on economic growth, steady interest rates and increased M&A activity.

On the sector front, the brokerage upgraded financial services sector to 'overweight' from 'neutral', and ⁠raised its recommendation on basic resources to 'neutral' ‌from 'underweight'.

Goldman also downgraded both the insurance and the food, beverage and tobacco sectors to 'neutral' from 'overweight'.

It raised its 12-month ‌forecast for ⁠the UK's benchmark FTSE 100 index to 10,400 points from 10,300.

(Reporting by ⁠Kanishka Ajmera in Bengaluru; Editing by Janane Venkatraman)