Less than a year after losing the crown of Europe’s biggest equity market, London looks set to recapture it from Paris, as the rally in French luxury shares falters.
Barclays’ strategist Emmanuel Cau reckons the UK market is currently a “good place to hide” and expects that energy exposure and easing inflation could spark “meaningful” investment inflows. His counterpart at HSBC, Max Kettner, turned bullish on UK equities this week for the first time since May 2021.
“The advantage of the UK market is that it is heavily weighted on energy stocks, which have been doing relatively better,” said Liberum Capital Ltd. strategist Susana Cruz. The energy sector has a 14% weighting in the FTSE 100, while Bloomberg Intelligence data shows analysts expect the industry to generate 20% of the index’s earnings this year.
Meanwhile, the pound has shed about 4% against the dollar this month, key for FTSE 100-listed firms which generate about 75% of their sales overseas. Strategists at Goldman Sachs Group Inc. expect pound weakness to continue boosting exporters.