Warming up again to financials
STOXX 600 down 0.5%
Miners, luxury lag
Hong Kong stocks sink
Wall St futures higher
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WARMING UP AGAIN TO FINANCIALS
The prospect of central banks aggressively cutting interest rates has made investors wary about adding positions to financials, especially given their strong run, but Friday's bumper U.S. labour market report might lead to a rethink.
The data painted an upbeat picture about the world's largest economy and sparked a repricing in bullish Fed rate cut bets.
As a result, Morgan Stanley has upgraded U.S. financials to 'overweight', advising for a more cyclical exposure.
"Given the strong labor data and the broader upward inflection in the economic surprise index, we now believe defensives are likely to see a period of relative underperformance versus cyclicals," Morgan Stanley analysts led by Michael Wilson said in a note this week.
"Friday's strong payroll report reduces growth risk at a time when the Fed is expected to continue cutting interest rates into next year... As the market rotates more pro-cyclically amid this backdrop, we see the large cap Financials sector outperforming", he also said.
Wilson downgraded Healthcare to 'neutral' and Staples to 'underweight' to reflect this positioning shift.
Separately, RBC maintained its 'overweight' rating on the financial sector, citing the sector's reasonable valuation profile and positive EPS and sales revision trends.
Contrary to MS, RBC is upbeat on the outlook for Healthcare and sees improving fund flows: "EPS revisions are fairly balanced between positive and negative revisions, while sales revisions have been slightly positive."
(Gokul Pisharody)
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FOR TUESDAY'S OTHER LIVE MARKETS POSTS:
REINSURERS ON WATCH FOR HURRICANE MILTON IMPACT CLICK HERE
BIG LUXURY: DON'T EXPECT FIREWORKS THIS SEASON CLICK HERE
EUROPE FLASHING RED AS LUXURY, MINERS AND HOMEBUILDERS DROP CLICK HERE
EUROPEAN FUTURES FAIL TO TRACK CHINA'S RALLYING OPEN CLICK HERE
CHINA STOCK FRENZY GETS A WET BLANKET CLICK HERE
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