Europe banks falling out of favour with equity strategists

Bloomberg

If you ask stock strategists, European banks are no longer a unanimous buy. Deutsche Bank AG lowered its recommendation on lenders to underweight, citing weaker economic momentum and falling German bond yields. The downgrade comes two weeks after a strategist at HSBC Holdings Plc said the bank has been cutting its position on European financials, predicting US 10-year Treasury yields will retreat. Betting on lenders was a popular trade going into 2018 on speculation rising yields and US tax cuts will spur more gains, but that optimism has been fading of late. After outperforming the Stoxx Europe 600 Index in the last year, the Stoxx 600 banks index has fallen more than the broader benchmark in the past one month. Economic reports and recent bond-market moves lend support to the strategists’ stance. Data this week showed the Purchasing Managers’ Index for euro-area manufacturing fell for a second month. A slowdown in export orders to the weakest in almost a year means growth could moderate further, IHS Markit said.
German bund yields have dropped from February highs, and the prospect of 10-year Treasury yields climbing to as high 3 percent dimmed this week as they retreated following US President Donald Trump’s vow to impose tariffs on foreign metals.