Citigroup upgraded its recommendation on Japanese stocks to "neutral" on Friday, citing the country's resilient economy and earnings, but downgraded British equities to "underweight" due to high exposure to oil price fluctuations. The Wall Street brokerage also reduced its rating for the global energy sector to "underweight" due to the oil sector's bearish outlook.
It stated that cyclical stocks should outperform if hopes of a "soft landing" in the United States prevail, with cyclical markets such as Japan benefiting as well. While Citi maintained a 1% contraction in its forecast for global earnings growth this year, the brokerage expects earnings to grow by 9% in 2024.
"Global economic risks appear more balanced in general, though downside risks remain," said Citigroup equity strategists in a note.
"Our forecasts indicate an EPS (earnings per share)'slowdown' rather than a full-fledged recession this year." A shallow earnings contraction favours cyclical outperformance," they added.
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