Strategists at Barclays said that if the earnings season for constituents of the Stoxx Europe 600 is broadly positive and the proportion of beats rises, European value stocks, growth stocks and small caps could benefit.

A team led by Emmanuel Makonga believes that if fiscal worries ease, the value sector could outperform the broader market; "narrowing eurozone sovereign debt spreads would create a clearer macro environment and drive value stocks to lead the market again."

Economic data coming in better than expected signals that the upcoming earnings season may deliver more positive surprises across the market.

Improving earnings are also favorable for growth stocks and smaller companies, while a recovery in the AI trade would further lift momentum stocks.

Barclays prefers undervalued individual stocks and remains cautious on high-priced, high-quality companies.