Equities: Resilience supported by strong macro – Danske Bank

Danske Research Team reports that Equities ended Friday higher, though several markets, especially in the US, finished the week lower. The team stresses that robust macro and earnings data, plus sector leadership from Materials over Utilities, show no defensive rotation. Low VIX levels and ongoing AI capex and Oil narratives keep overall equity resilience in focus.

No defensive rotation despite risks

"Equities closed higher on Friday, but that does not change the fact that several markets ended the week lower, most notably in the US. The Nordics stood out as one of the strongest regions last week."

"The overarching story has not changed much. Four forces are currently shaping equity markets: the oil story around the Strait of Hormuz, the durability of the AI capex buildout, the recently added fear of dollar debasement and, most importantly, exceptionally strong macro data."

"The latter remains the key factor keeping equities afloat, as demonstrated again last week and particularly by Friday's PMIs."

"The sector performance is revealing in this context. Materials was the best performing sector last week, while Utilities was the worst. In other words, we have not seen a genuine defensive rotation, which is exactly what we would normally expect when macro (and capex) are solid market."

"Volatility also remains generally low. The VIX hovered around 15.5 through last week but ultimately ended broadly unchanged."

"Asian markets are mostly lower again this morning, with South Korea again seeing the greatest volatility. US and European equity futures are trading close to Friday's closing levels."

"With macro and earnings data this strong, the resilience of equities should not be underestimated."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)