Bank of America lowered its rating on UK stocks on Thursday, arguing that there is limited upside potential for energy stocks from here.
Strategists led by Milla Savova felt that the UK would shift the overweight from market to market. “UK stocks tend to outperform in times of weakness in the pound sterling (given their strong overseas sales), strength in the energy sector (given the UK’s overweight in the sector). ) and defensive outperformance. The balanced paths we expect for energy and cyclicals versus defensives mean little upside for UK stocks over the next few months, ”they said.
But they are overweighted in Spain, Italy and Germany, saying eurozone purchasing managers’ indices will stay close to current levels for the remainder of the third quarter, and bond yields should rise as a result. that central banks reduce their easing. “Our projections are consistent with an outperformance of around 5% for Spanish and Italian equities, as they should benefit from their heavy weighting in banks if the eurozone’s growth momentum remains strong and bond yields rise,” said declared the strategists.
They are underweight Swiss equities given expectations of a further rise in bond yields due to their heavy weight in defense.
It was a fairly lackluster trading day in Europe despite a burst of earnings as investors were cautious as Friday’s US wages report approached.
The Stoxx Europe 600 SXXP,
rose 0.2% to 469.19. Among the main regional indices, the German DAX DAX,
gains 0.1%, the French CAC 40 PX1,
increased by 0.3% and the UK FTSE 100 UKX,
decreased by 0.1%.
Danish pharmaceutical Novo Nordisk NOVO.B,
jumped 4% as it raised its forecast for the full year, amid strong demand for its new obesity treatment.
shares fell 6% after the German chemicals and pharmaceutical giant reported worse-than-expected operating profit and said it was buying Vividion Therapeutics Inc. under a deal of about $ 2 billion.