Deutsche Bank has dropped its preference for US equities over European peers and moved to a neutral positioning, with the bank's strategists pointing to the US-Iran peace deal as a key trigger for reassessing the relative trade.
Maximilian Uleer at Deutsche Bank said the team closes "our relative preference for US versus European Equities and turn Neutral," citing three drivers: the near-term reopening of the Strait of Hormuz, a US Technology sector that has already staged a significant rebound, and an expected narrowing of the earnings growth gap between the two regions.
The Strait of Hormuz, which has been effectively closed for more than three months since the conflict began in late February, carries the bulk of Persian Gulf oil and gas exports, and its reopening reduces a structural drag that had weighed disproportionately on European industrial and consumer sectors.
Jim Reid at Deutsche Bank noted the immediate market reaction: Brent crude fell 4.3% to $83.31 per barrel, while S&P 500, NASDAQ 100, and Stoxx futures rose 1.20%, 1.90%, and 1.60% respectively.
Consumer-facing sectors including Autos, Staples and Luxury had been particularly hard hit by war-related disruption, though Deutsche Bank made no sector-specific changes to recommendations pending further evidence of improvement.
