Goldman boosts 3-month target on STOXX Europe 600

Goldman also upgraded European banks and utilities sectors to "overweight" from "neutral," and financial services and construction and materials industries to "neutral."

"While we think uncertainties remain high and a pull-back is not unlikely, we would no longer expect it to be sustained on a three-month basis," said Goldman, as it raised its three-month target for the STOXX Europe 600 index to 270 from 250.

It raised its six-month target to 275 from 265, and still expects the index to reach 290 points in 12 months.

The ECB's Long Term Refinancing Operations (LTRO) funding has improved liquidity at European banks and effectively removed the likelihood of a major bank failure in the continent over the medium term, said Goldman.

The ECB's LTROs flooded markets with almost half a trillion euros of cheap three-year cash in December and provided more of the same last month. The ECB unveiled the LTROs late last year to counter frozen interbank lending and dampen tensions on euro zone bond markets that threatened to tear the bloc apart.

While telecoms and utilities offer the highest dividend yields in the market, the utilities sector offers a more sustainable yield than telecoms, the brokerage said while downgrading telecoms to "underweight" from "overweight."

Goldman also lowered its rating on healthcare and personal and household goods sectors to "neutral."

It raised its 3-month target for the FTSE 100 index to 6,000 from 5,600, and its 6-month target to 6,200 from 6,000.