STOCKS NEWS EUROPE-Deutsche Bank backs buying financials futures

Wed May 1, 2013 4:01am EDT

Deutsche Bank strategists back favouring the banking and financial sector, on expectations that "cyclical" stocks - those most sensitive to the state of the global economy such as banks or miners - will outperform more defensive sectors as the economic environment improves.

"The European equities rally earlier this year was led by defensives, not cyclicals - which we expect will benefit most in an equities re-rate. Within cyclicals, we expect financials to be the most attractive sector as the implied cost of equity is now retracing mid-crisis levels, and a positive credit impulse surprise would benefit banks the most," it writes in a research note.

Deutsche Bank recommends building up exposure to a possible rally in European bank stocks by buying futures contracts on the euro zone's Euro STOXX 50 bank index and on the broader pan-European STOXX Europe 600 Banking Index.

The Euro STOXX 50 bank index has edged down by 0.4 percent since the start of 2013, underperforming a 3 percent rise on the broader Euro STOXX 50 index, while the STOXX Europe 600 Bank Index has risen 5 percent - again slightly underperforming a 6 percent rise on the broader European STOXX 600 index.

Earlier this week, several leading European banks posted first-quarter results that beat market forecasts, such as Deutsche Bank, Lloyds and UBS.

Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article