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LONDON, Sept 30 (Reuters) - JPMorgan raised its rating on
euro zone equities to "overweight" on Monday, reversing a
longstanding preference for U.S. shares, and said the bloc's
battered stocks have an opportunity to bounce back.
The bank said U.S. shares are being cut to "neutral" and
that it will shift some money to European stocks, because the
European Central Bank's pledge of indefinite stimulus is likely
to revive an ailing euro zone economy. "We now believe that there is an opportunity for Eurozone to
bounce back," lead equity strategist Mislav Matejka said, adding
that current valuations present "a good entry point".
The ECB has resumed quantitative easing, which should help
euro zone stocks, the bank said in a note to clients. Any
increase in fiscal stimulus speculations could help as well, it
said.
"While JPM base case is that meaningfully stronger fiscal
support is unlikely anytime soon, we believe that equity markets
could start to price in increasing odds of this happening,"
Matejka added.
European stocks have underperformed U.S. shares since the
2008 financial crisis, dragged down by a debt crisis, slowing
economies and the recent U.S.-China trade war.
Banking stocks in particular have suffered in the past 10
years and JPM has preferred U.S. banks, but now it believes a
reversal might be coming.
Global funds have shunned euro-zone stocks amid rising trade
tensions, Brexit risks and a German manufacturing slowdown. The
most recent fund flow data by Bank of America Merrill Lynch
showed funds had pulled money from the region for 78 out of the
past 81 weeks.
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Europe's underperformance vs. U.S. https://tmsnrt.rs/2nPGVGA
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