BlackRock upgrades European stocks to ‘overweight’ on economic restart

FAN Editor
The German share price index DAX graph is pictured at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 18, 2020. REUTERS/Staff

June 29, 2020

By Karin Strohecker and Dhara Ranasinghe

LONDON (Reuters) – Europe’s efforts to kickstart economies hit by COVID-19 has prompted BlackRock Investment Institute to upgrade its view on European stocks to “overweight”, while warning of a risk that the U.S. policy response could be scaled back too soon.

“The region (Europe) is exposed to a cyclical upside as the economy restarts, against a backdrop of solid public health measures and a galvanizing policy response,” BlackRock, the world’s largest asset manager, said in its mid-year outlook.

The same applied to Japanese stocks, which BlackRock upgraded from “underweight to “neutral”.

This came at the expense of U.S. stocks, for BlackRock reduced exposure to “neutral”, citing risks of fading fiscal stimulus, an extended epidemic and renewed China-U.S. tensions.

“The U.S. was strong in its monetary policy response, its fiscal response,” Mike Pyle, global chief investment strategist at the BlackRock Investment Institute, said during a mid-year media briefing.

“As we look out over the coming 6-12 months, we think there are significant risks around the U.S. retrenching too soon the policy support,” Pyle added.

World stocks have been on a rollercoaster ride in the first half of 2020.

Having slumped 35% from Feb. 20 to March 23, they are now within 10% of February’s record highs thanks to lashings of fiscal stimulus, interest rates reduced to 0% or below in most major economies and massive quantitative easing by central banks.

European stocks <.STOXX> are down almost 14% since the start of the year, while the S&P 500 <.SPX> has slipped 6% over the same period.

In fixed income, BlackRock said it liked U.S. Treasuries and expected long-term bond yields to fall further than other developed market peers.

BlackRock also downgraded both hard currency debt and equities in emerging markets to “underweight”, citing limited policy space to counter the economic fallout from the coronavirus pandemic.

(Reporting by Karin Strohecker and Dhara Ranasinghe; Editing by Gareth Jones)

Free America Network Articles

Leave a Reply

Next Post

Texas governor pauses reopening as coronavirus cases surge

In Local Matters, CBSN’s Elaine Quijano takes a closer look at the recent surge of COVID-19 cases in Texas, where Governor Greg Abbott has paused plans to continue reopening the state. Politico’s Texas correspondent Renu Rayasam joins “Red and Blue” to discuss the latest developments. Free America Network Articles