Equities: Rotation persists as tech sells off – Danske Bank

Danske Research Team reports a sharp global equity selloff led by a more than 4% drop in tech, even as several defensive sectors finished higher. They stress that earnings momentum and valuations remain supportive, framing recent setbacks as positioning-driven corrections rather than a change in trend, with the broader equity direction still seen as positive.

Tech-led setback but trend intact

"Equity markets sold off sharply yesterday, driven by one sector in particular. Global tech was down more than 4%. Yet even with the broader equity market down almost 2%, four sectors still ended higher, with consumer staples and healthcare both up more than 1%."

"That says a lot about the current setup. The underlying growth and earnings picture remains solid, and investors are rotating across equities rather than engaging in a broad based sell off. That said, when a sector of this size can fall 4% in a single session without major sector specific news, we also know where we are in the cycle."

"We keep coming back to the fundamental picture. Earnings momentum is still moving in the right direction, and valuation is not a challenge."

"What is extreme is positioning and the momentum we have seen since late March. That means we should expect setbacks when markets have moved this fast, and we should expect more of them."

"It does not change our view that the broader direction typically remains positive as long as the fundamental backdrop stays this strong."

"This morning, Asia is more mixed. Most markets are higher, led by South Korea, while Japan is dragging lower. US futures are broadly higher, while European futures are slightly lower."

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