Bargain hunters beware. European stocks may look cheap following a 15% fall in the Stoxx 600 index of leading companies in the past five weeks; price-to-earnings multiples aren't far off their November 2008 lows. But stocks could catch another bout of the blues once lower growth expectations start to feed into earnings forecasts.

Sure, European corporate balance sheets are stronger than they were in 2008, and the European Central Bank has room to loosen policy. But government austerity policies in response to the sovereign-debt crisis could knock one quarter of a percentage point off growth next year alone, UBS estimates.