• We are entering the seasonally weaker part of the year which could call for some consolidation,
especially given the very strong year-to-date upmove. Having said that, our global equity strategists
believe that any weakness remains a buying opportunity, as the rally is likely to gain a fundamental
confirmation in 2H. The strategy team is expecting Chinese and European PMIs to move higher into year
end, which should support better earnings delivery. The Q1 results are generally coming out better than
the reduced expectations. US revenue growth in particular is healthy. Furthermore, they believe that bond
yields are likely to inflect higher, which could drive a broadening in market participation. Their core
OW was Tech and they were unexcited by Banks over the past year, but have last week upgraded the Banking
sector to OW. Banks were the worst performing sector over the past 12 months and have become cheap. Banks
are a key play on improving global activity trends and potentially higher bond yields. In addition,
peripheral spreads are well behaved, with Banks likely to benefit from this. Italian NPLs as a share of
total loans are falling sharply and Banks have reported notable improvement in balance sheets. Euribor
curve drag might not get much worse and credit spreads are holding in. They fund this move by taking
profits on Insurance, as the sector appears to have overshot bond yields. In addition, they also reduced
Healthcare from N to UW as the group trades inversely with bond yields and could be impacted adversely by
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