Equities: Rotation persists with strong macro backdrop – Danske Bank

Danske Research Team highlights ongoing sector and regional rotation in global equities, with European and Asian stocks advancing while US equities slipped. Technology and Iran/oil narratives drove intraday volatility, but the team stresses that the macro environment remains exceptionally strong, supporting expectations for subdued overall volatility and a gradual upward path for equities over time.

Volatility driven by rotation themes

"Equity markets moved higher yesterday, but once again the dominant theme was not the index level itself but the significant sector and regional rotation underneath."

"While European and Asian equities advanced, US equities moved lower, with trading once again dominated by intraday volatility centred on technology and the Iran/oil narrative."

"Micron's exceptionally strong earnings released Wednesday evening also failed to provide lasting support for technology, as investor discussions increasingly revolve around the sustainability of earnings growth and, in particular, today's unusually elevated profit margins across parts of the semiconductor and memory complex."

"It remains important to separate these rotation drivers from the underlying macro environment. The current volatility is being driven by geopolitics and ongoing questions surrounding parts of the technology sector, while the macro backdrop remains exceptionally strong."

"That continues to argue for subdued overall market volatility and an upward direction for equities over time."

"This morning Asian markets are trading sharply lower, led by the more technology intensive markets, while both US and European futures are also lower with technology once again accounting for most of the weakness."

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