July 10 (Reuters) – Citigroup on Monday downgraded U.S. shares in anticipation of a pullback in development shares and a recession within the fourth quarter of the yr, whereas betting on beaten-down counterparts in Europe with an improve.
The brokerage lower its ranking on U.S. shares to “impartial” from “chubby”, following a powerful rally within the first half of the yr. It warned that development shares had been set for a pullback because the “euphoria” round synthetic intelligence enters a extra “digestive” section.
Citigroup as an alternative sees potential in “closely discounted” European shares, because the financial institution elevated allocation to some cyclicals. These embody the supplies sector, which is seen benefiting from a possible uptick in China's financial development.
The S&P 500 (.SPX) has gained 14.6% to this point this yr, whereas the tech-heavy Nasdaq (.IXIC) jumped about 31%, pushed primarily by a handful of tech shares that rode excessive on AI potential.
Futures monitoring the S&P 500 had been flat by 8:00 a.m. ET.
Citigroup additionally downgraded the worldwide IT sector to “impartial”.
Strategists on the brokerage downgraded UK shares on a scarcity of publicity to development shares and a stronger pound . Rising market (EM) shares, upgraded to an “chubby” ranking, changed the UK shares in Citigroup's asset allocation.
“EM gives a extra attention-grabbing danger/reward profile, with publicity to a mix of development and supplies. It might additionally profit from USD weak spot, price cuts and potential enchancment in China sentiment,” the strategists mentioned.
Reporting by Subhadeep Chakravarty; Enhancing by Shilpi Majumdar
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