European stocks in favour after bailout deal

In the wake of the bailout agreement for Greece last week, Goldman Sachs has upgraded its view on European stocks.

"European equities have been one of the key asset classes to benefit from a fading of Greek risks following their drawdown," Goldman Sachs wrote in its Global Opportunity Asset Locator report published on Monday.

It upgraded its three-month view on European equities to "overweight" while downgrading US stocks to "underweight". It expects the STOXX Europe 600 to return 1.9 percent, 5.1 percent and 12.9 percent in local currency terms on a three-month, six-month and 12-month basis respectively.

The Bank of America Merrill Lynch Fund Manager Survey for July published last week also found that views on European stocks were positive. "Despite the Greek news flow, intention to own European assets is high and rising, though global growth remains vitally important for European stocks," said Manish Kabra, European equity strategist at BofA Merrill Lynch Fund Manager Survey.

Still, economists remain pessimistic about Greece's ability to stay in the euro group. A Bloomberg survey of 34 economists showed that 71 percent of them think that there is still a danger that Greece will be forced out of the euro region by the end of 2016.