Pharma stocks to outperform versus Miners as US dollar gains, Deutsche Bank says

The approximately 5% gain in the US dollar index over the past three months would have been consistent with double-digit outperformance by the former, the investment bank said.

Pharma tended to do well when the greenback strengthened because roughly 38% of the European sector's sales were denominated in US dollars, while dollar gains tended to drag on commodity prices, it said.

Critically, Deutsche's FX strategists forecast was for another leg higher in the US dollar, which they saw ending 2017 up by 5.0%.

However, the higher the US dollar moved "the more likely this performance is to reverse", they added.

Markets pricing in a more aggressive US Fed in 2017 or a disorderly devaluation of the Chinese yuan were among the possible triggers for dollar strength.

On the other side of the equation, the main risks to their 'call' were a further boost to metals' prices should China's economy grow more quickly than anticipated or a sharp devaluation in Sterling linked to Brexit.

Deutsche Bank said it was 'positive' on the sector, singling out Shire, AstraZeneca and Sanofi as their 'top picks'.