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Aug. 5, 2021, 8:56 a.m. EDT

Bank of America downgrades U.K. stocks and reiterates overweight on Spain, Italy and Germany

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By Steve Goldstein

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 /zigman2/quotes/210599654/delayed XX:SXXP +1.11% rose 0.2% to 469.19. Of the major regional indexes, the German DAX /zigman2/quotes/210597999/delayed DX:DAX +1.35% gained 0.1%, the French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.11% increased 0.3% and the U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.62% declined 0.1%.

Danish pharmaceutical Novo Nordisk /zigman2/quotes/207193277/delayed DK:NOVO.B +1.97% jumped 4% as it raised full-year guidance, amid strong demand for its new obesity treatment.

Bayer /zigman2/quotes/206842998/delayed XE:BAYN +0.78% 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.

/zigman2/quotes/210599654/delayed
XX : STOXX
438.50
+4.83 +1.11%
Volume: 0.00
May 17, 2022 4:26p
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/zigman2/quotes/210597999/delayed
DAX
DX : Xetra Indices
14,152.66
+188.28 +1.35%
Volume: 46,593
May 17, 2022 4:26p
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/zigman2/quotes/210597958/delayed
FR : France: Euronext Paris
6,418.46
+70.69 +1.11%
Volume: 50,541
May 17, 2022 4:26p
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,511.13
+46.33 +0.62%
Volume: 417,806
May 17, 2022 3:26p
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/zigman2/quotes/207193277/delayed
DK : Denmark: OMX
kr. 749.50
+14.50 +1.97%
Volume: 801,921
May 17, 2022 4:26p
P/E Ratio
34.84
Dividend Yield
1.39%
Market Cap
kr.1654.76 billion
Rev. per Employee
kr.3.12M
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/zigman2/quotes/206842998/delayed
XE : Germany: Xetra
63.70
+0.49 +0.78%
Volume: 1.45M
May 17, 2022 4:26p
P/E Ratio
28.42
Dividend Yield
3.14%
Market Cap
€62.10 billion
Rev. per Employee
€465,610
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