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Weaker leading indicators will successively dominate in the course of 3Q

- Stress test: "The impact of the stress test on the ability of the interbank money market to function is a key indicator with respect to the mediumterm impact on the parameters for the equity market. The more strongly the stress in the banking system is ultimately linked with the problems of individual countries (government deficit, competitiveness), the less probable rapid relief is."
- EMU: "The causes of the tensions in EMU can only be eliminated via a protracted reform process. The possible renewed escalation of the tensions remains a material risk factor."
- Economy: "The recent rise in the Ifo expectations does not mark the beginning of a new positive trend. The positive share price effects from the reporting season will successively wane, and the strains from weaker leading indicators will increase."
- Financials: "Rally yes – sustained no. We think three risk groups will cut short the rally by the banks: credit risk, sovereign risk and regulatory risk."
- Defensives: "Growing appeal in 2H10. Leading indicators such as the money supply M1 are signaling the turning point in the relative earnings dynamic of cyclicals versus defensives."
- STOXX 600 allocation: "Chemicals, Oil & Gas, Telecom and Utilities remain overweighted. Alongside Construction & Materials, we are underweighting Basic Resources and Retail."

Unicredit Market Outlook 20100730

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