Credit Suisse still positive on European stocks, ups view on UK
A mis-match between the performance of stocks from 'cyclical' geographical regions, such as Continental Europe, Emerging Markets and Japan versus cyclical sectors meant there was an opportunity to be had, strategists at Credit Suisse said as they reiterated their positive stance towards shares from the former two of those regions.
The Swiss broker also had a good word for UK stocks, which it bumped to 'Benchmark'.
On Continental Europe, the strategy team led by Andrew Garthwaite pointed out how economic growth in 2017 might again be faster than that in the US, which implies shares on the other side of the Channel should outperform global stockmarkets by 16%.
Garthwaite and his colleagues added to their position in Spanish stocks, while sticking to an 'Overweight' on France, while lowering Germany to 'benchmark' and went more 'Underweight' on Italy.
Weak GDP growth to cap gains in the pound
Significantly, one of the main reasons why they are more optimistic on UK equities is because in their view Sterling is not likely to strengthen much further and currency is the main driver for the group.
The other main drivers for UK stocks are Global Emerging Markets and commodities, with 11% upside seen in the case of oil.
Offsetting the above, British GDP growth is set to disappoint, they said, growing by 1.4% this year, although that will help to cap gains in the pound.
"General retail looks very cheap, and we see a long transition period for Brexit. We continue to favour UK euro earners," the strategists said.
On GEM, Japan and the US
They also add to their 'Overweight' on Global Emerging Markets, pointing to the positive impact of "disruptive" technologies on economies' underlying health and the fact that only 16% of the outflows seen in 2016 had reversed.
"Chinese equities stand out. We would also recommend Korea and India within a global context. Taiwan offers risk hedging characteristics."
As regards Japan, the Swiss broker says it has slightly reduced its 'Overweight'.
Credit Suisse also stays at an 'Underweight' on the US, excluding the technology space.
That is because labour in the States is closest to gaining pricing power, monetary policy is returning to normal settings and the degree of corporate leverage is back to its previous peaks.
"It scores bottom on our composite scorecard. It is an overly defensive market pricing in a sharp slowdown in global GDP growth."