HSBC analysts upgrade European equities to "overweight" from "neutral" for the first time in three years as part of a fourth-quarter strategy outlook in which the bank flags financials and utilities as key sector picks and focuses on 'value' as an investment theme.
"With valuations low (though not as ultra-cheap as earlier in the year) and investors in only the early stages of taking on more risk (though sentiment improved sharply in September), we think that equity markets can rise moderately from here," they write in a note.
"Value is the key theme across our regional, country and sector recommendations. We expect value opportunities to be the biggest beneficiaries from the easing of global financial conditions that we believe will materialise as a result of central bank actions."
The bank's strategists say they have not taken a position on the strength of the global economy given heightened uncertainty about a move in either direction, and are "neutral" on both cyclicals and defensives. "Sector performance has been mixed so far this year, and we expect this to continue."
HSBC ups financials to "overweight" from "neutral", as it expects them to be the biggest winner from any European stock market gain, and upgrades utilities to "overweight" from "underweight".
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Keywords: MARKETS EUROPE STOCKSNEWS