J.P.Morgan reiterates 'underweight' on euro area stocks
Equity strategists at J.P. Morgan reiterated their 'underweight' stance towards Eurozone equities and sounded a "cautious" note on the outlook for China, a key driver of activity in the region.
In particular, they judged that the 'Growth-Policy' trade-off in the region was likely to worsen across the back half of 2023.
The next leg down would be driven by a decline in lower bond yields and earnings disappointments, the strategy team led by Mislav Matejka at J.P.Morgan said in a research note sent to clients.
Banks might still release good quarterly results, but their recommendation was to reduce into any strength.
They were cautious towards Chemicals and Mining, while Capital Goods could start to see weakness, they added.
As for Semiconductors, many had outperformed on the back of the Artificial Intelligence theme but the benefit was likely to only be marginal.
"The above outcome could be reinforced by any potential further disappointments in China.
"[...] The region is sliding back into deflation and the property market will likely need a much more aggressive policy support to rebound sustainably, given past excesses."