This post was originally published on this site
Bank of America on Thursday downgraded its view of U.K. equities, arguing there’s limited upside for energy stocks from here.
Strategists led by Milla Savova took their view on U.K. to marketweight from overweight. “U.K. equities tend to outperform in periods of GBP weakness (given their high foreign sales), energy sector strength (given the U.K.’s overweight in the sector) and outperformance by defensives. The balanced trajectories we expect for energy and cyclicals versus defensives imply little upside for U.K. equities over the coming months,” they said.
But they’re overweight on Spain, Italy and Germany — saying euro area purchasing managers indexes will remain close to current levels for the remainder of the third quarter, and bond yields should rise as central banks reduce easing. “Our projections are consistent with around 5% outperformance for Spanish and Italian equities, as they should benefit from their high weightings in banks if euro area growth momentum remains robust and bond yields rise,” the strategists said.
They’re underweight Swiss equities given expectations of renewed bond yield upside, because of their large defense weighting.
It was a pretty dull day of trading in Europe despite a flurry of earnings, as investors were cautious heading into Friday’s U.S. payrolls report.
The Stoxx Europe 600
SXXP,
rose 0.2% to 469.19. Of the major regional indexes, the German DAX
DAX,
gained 0.1%, the French CAC 40
PX1,
increased 0.3% and the U.K. FTSE 100
UKX,
declined 0.1%.
Danish pharmaceutical Novo Nordisk
NOVO.B,
jumped 4% as it raised full-year guidance, amid strong demand for its new obesity treatment.
Bayer
BAYN,
shares dropped 6% after the German chemicals and pharmaceutical giant reported a worse-than-forecast operating profit and said it’s buying Vividion Therapeutics Inc. in a roughly $2 billion deal.
