German DAX and French CAC Lead World Indices Lower on Covid Lockdown Fears

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BofA Global Research has upgraded German stocks to overweight on expectations a vaccine-enabled economic recovery will help them outperform next year, while it downgraded pro-cyclical French stocks to marketweight after their recent rally.

“We expect Euro area PMIs to rebound from the current level of 44 to a recovery high of 60 in Q2, helped by a vaccine roll-out and U.S. fiscal stimulus,” BofA investment strategist Milla Savova wrote in a note on Tuesday.

“Our macro projections imply 10% outperformance for German equities by Q3,” she added.

BofA remains overweight Italy, Spain and the UK and underweight Switzerland, which tends to underperform when US bond yields rise.