"We upgraded European equities yesterday, after the (French) election. And in order to fund it, we went a little bit underweight U.S. equities," Stefan Kreuzkamp told Reuters.

Sectorwise, Kreuzkamp said financials were the most attractive because banks and other firms involved in the 2008 financial crisis had now run the gauntlet of ensuing litigation and restructurings and are ready to concentrate again on operating their businesses.

"We expect interest rates in Europe will go up at the longer end and the yield curve will get steeper. This obviously helps financials as well," he added.

European share prices rose sharply after centrist Emmanuel Macron won the first round of voting in the French presidential election, putting him on course to a likely victory against far-right candidate Marine Le Pen in the second round on May 7.

Kreuzkamp, responsible for 706 billion euros (590.53 billion pounds) of investments, said the Deutsche Bank asset management arm maintained its bullish stance on the U.S. dollar, citing anticipation of tighter Fed policy and potential fiscal stimulus promised by President Donald Trump.

He said the firm expects the 10-year U.S. Treasury yield to rise to around 3 percent by the end of the year, about 60 basis points above the current levels.

"We’re expecting the Fed to further raise interest rates-- two more hikes in 2017 and maybe three more in 2018," he said.

The Frankfurt-based CIO also said Deutsche Asset Management expects the euro to reach parity against the dollar by year-end, due mainly to the interest rate differential between Europe and the United States. It currently trades at $1.088.

"The outcome of the French election (first round of voting) triggered a relief rally in the euro. In the short term, I won't rule out the euro going to 1.10 but strategically, we still believe in the dollar's appreciation. I think it's too early to exit."

Kreuzkamp forecasts the dollar-yen rate will strengthen to 120 yen by year-end, from around 110 yen now, citing the widening differential between U.S. and Japanese interest rates.

(Reporting by Tomo Uetake; Editing by Greg Mahlich)

By Tomo Uetake