Deutsche sees attractive entry point in Consumer Staples, Real Estate

Investing.com -- Deutsche Bank told clients in a note on Monday that it sees an attractive entry point for an overweight position in Consumer Staples and Real Estate heading into the third quarter, while turning neutral on Basic Resources after a sharp sector rally.

In its third-quarter outlook, the bank's European equity and cross-asset strategy team said it "looks for sectors with catch-up potential, negative correlations to rates and improving earnings growth," identifying Consumer Staples and Real Estate as the standout opportunities.

On Basic Resources, Deutsche Bank said it is moving to neutral after the sector rallied 46% since April 2024, arguing that "higher commodity prices seem priced in" and that "a stronger USD, tariff uncertainty and seasonality provide near-term headwinds."

At the regional level, Deutsche Bank said Europe "has all the ingredients to outperform the US in Q3, except for earnings," pointing to positioning, lower energy prices, a more favorable rates outlook and improving macroeconomic data as tailwinds.

However, the bank said it expects "a similar pattern as in Q2. European outperformance before and after the earnings season but stronger US equities during the earnings season."

On Germany specifically, Deutsche Bank said it expects the tide to turn "from outflows in Q2 to inflows in Q3," maintaining its view that German mid-caps, particularly those exposed to growing infrastructure spending, "will be among the biggest winners in markets."

The bank also maintained its overweight on European small and mid-caps, describing the combination with its positive Germany view as "one of the clearest expressions of our constructive European equity outlook."

You May Also Be Interested In

• Is the global equity rally broadening? UBS weighs in
• RenovoRx regains Nasdaq minimum bid price compliance
• Intchains Group Ltd (ICG) PT Lowered to $2 at Benchmark Following 1H Results