Citigroup recommends investors seek re-leveraging candidates, cyclical stockswith U.S. bias and be more wary of income only stocks in its European equitystrategy, as blanket deleveraging ends, global growth shows signs of improvementand quantitative easing approaches its conclusion in U.S.
With European markets juddering on concerns of an imminent withdrawal ofstimulus in the United States -- Europe's STOXX 600 has fallen around 6percent since its mid-May peak -- Citi recommends using the current pullback totake on more exposure to the U.S. and financials.
The investment bank upgrades its ratings on the travel and leisure and financial services sectors to "overweight" with food group Compass, hotellier Intercontinental Hotels, low-cost airline Ryanair, German airline Lufthansa, UK asset manager Schroders,and private equity firm 3i its preferred stocks.
"The recent rise in U.S. bond yields could be the early stages of US policynormalization. We think that European investors should position by tilting toU.S. exposure and to financials, as well as looking for earnings leadership,"Citi says in a note.
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