German stocks to continue benefiting from reflation trade, JP Morgan says

Equity strategists at JP Morgan sounded a confident note on German stocks, telling clients that they would continue to benefit from both the 'global reflation' trade and their allure as a hedge for French political risk.

The global reflation trade still had "legs", strategist Mislave Matejka said, pointing to the fact that Citi´s widely-tracked Economic Surprise Index had yet hit a three-year high.

Germany´s benchmark Dax index also had the biggest bias towards Cyclical shares in terms of its composition.

Indeed, even if one was convinced that activity had peaked that did not necessarily mean the market needed to undergo a correction, he said.

Domestic reflation in Germany was also still going strong, Matejka said, with credit and house price growth at their highest since 2009, while the Dax 30 was changing hands at its cheapest in 25 years on the basis of its relative price-to-earnings multiple.

The Dax was also "exceptionally attractive" against German bonds.

Finally, going forward the euro might yet weaken and the Eurozone´s largest economy was a good hedge on French political risk.