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
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
Reuters messaging rm://email@example.com