Moran Stanley Downgrades European Energy, Auto Sectors; real estate upgrades by Investing.com

Morgan Stanley made adjustments to its sector recommendations in Europe, downgrading the energy and auto sectors while upgrading real estate and diversified financials to overweight in a note on Thursday.

According to Morgan Stanley, the energy sector was downgraded from equal weight to underweight due to the expected peak in the crude oil market, the resumption of OPEC and non-OPEC production growth after the third quarter and what the firm describes as “on fully evaluated”. “TTF and LNG prices.

The energy sector’s position in Morgan Stanley’s model fell significantly, reflecting positive bond yield correlation, weak earnings trends and weak price strength, analysts at the firm noted.

The auto sector was also downgraded to underweight.

“Automotive was already borderline underweight in our last model update (19th out of 28 sectors), but has fallen further to 26th,” the analysts wrote.

Since then, the sector ranking has fallen further to 26th. This downgrade is in line with the cautious view of the company’s sector analysts.

In contrast, Morgan Stanley upgraded Diversified Financials (DivFins) and Real Estate to Overweight from Equal Weight.

New components of the company’s model favor stocks sensitive to bond yields, which benefit both sectors. For DivFins, the upgrade is supported by improved management sentiment, strong idiosyncratic momentum and a deceleration in employee turnover.

On the other hand, real estate is said to benefit from strong idiosyncratic momentum, high M&A exposure, and is no longer penalized for high leverage under the new model.