Deutsche Bank's European equity strategy team is forecasting a rise of around 14 percent in the STOXX 600 European index over the next year, and backs the Italian equity market among the region's bourses.
Deutsche writes in a strategy note that it expects the STOXX 600, which is up by 0.3 percent at 276.93 points on Tuesday, to end 2013 at 315 points, and to finish 2014 at 340 points.
"We are positive on the outlook for equities due to an expected rebound in global growth to 3.5 percent in 2013, led by U.S. growth of 2.5 percent," they write.
"We expect global growth of 3.5 percent to drive EPS (earnings per share) growth of 6 percent for the STOXX 600, and for the decline in euro area sovereign risks to cause the market to re-rate to 12.5 times forward earnings," they add.
The Deutsche team recommends overweight positions in the banking, insurance, telecom, chemicals, media and construction sectors.
"We prefer value over growth and like the Italian market relative to the Swiss market," they add.
Their favoured stocks for 2013 include Telecom Italia, Italian bank Intesa, insurer AXA, recruitment company Adecco , and advertising group JC Decaux.
Others include construction group St Gobain, chemicals group BASF , oil field services company Hunting, Swedish bearings product manufacturer SKF and car dealer Inchcape.
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