HALISTER1: Central Bank Action Not Enough to Boost Stocks: Deutsche Bank

Central Bank Action Not Enough to Boost Stocks: Deutsche Bank

(Bloomberg) -- Scope for structural upside for European equities on the back of central bank action is limited, and neither stronger growth, higher inflation nor further FX depreciation seem likely to step in, Deutsche Bank equity strategists including Sebastian Raedler write in note.
  • Deutsche Bank remains cautious on outlook for European equities, confirms Stoxx 600 year-end target of 325, or ~5% downside from current levels
  • Recommends long dollar plays, long bond proxies, underweight resources, cautious on financials
  • Overweight FTSE 100 versus FTSE 250 and Stoxx 600
  • With U.S. productivity growth weak, China’s credit stimulus fading and the U.K. likely to go into a post-referendum recession, global growth is likely to remain subdued
  • Deutsche Bank FX strategists see only ~1% downside for euro trade-weighted index by year-end, pointing to limited FX support for EPS growth
    • However, U.K. earnings should be helped by further GBP weakness as the BoE eases more
  • NOTE
    • Stoxx 600 down 5.7% YTD vs S&P 500 up 6.7%
    • Aug. 9: Earnings Season Shows Profit Drop in U.S. and Europe: JPMorgan
    • Aug. 8: European Earnings ‘Reasonably Strong’, Growth Still ‘Dismal’: MS
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Sebastian Raedler (Deutsche Bank AG)

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