Citigroup hikes US equities to 'overweight', sees demand for growth stocks

[BENGALURU] Citigroup upgraded US equities to "overweight" rating on Thursday (Mar 3), on analysts' expectations of a revival in appetite for growth stocks due to a sharp drop in bond yields following the Ukraine-Russia crisis.

Bond yields plunged after Russia's invasion of Ukraine last week ramped up the prospects of inflationary risks, but the expectations of interest rate hikes from major central banks have dropped.

"Despite the difficult events in Ukraine, global equities have been fairly robust. The latest plunge in real yields does imply that this year's derating of growth stocks should stop," said economist Robert Buckland.

US Treasury yields surged on Wednesday, bouncing off 8-week lows, as Federal Reserve chair Jerome Powell supported the US central bank raising rates this month, while being flexible in response to the Russia-Ukraine war's impact on the economy.

The benchmark 10-year yield rose to 1.875 per cent on Wednesday after its 1.682 per cent dive in the prior session - the lowest since Jan 5.

Citigroup said shares of companies in its list of 60 stocks with "meaningful exposure to Russia" slumped 17 per cent so far this year, compared with an 8 per cent drop in the MSCI's gauge of stocks across the globe.

PepsiCo, Glencore, Carlsberg Epam Systems and Uniper are some of the big names in the list.

The brokerage raised the global IT sector to "outperform", citing its robust performance growth of 2 per cent since the Ukraine-Russia conflict, according to Citigroup's analysis.

Citigroup also downgraded the rating of Japan and global industrial sector to "neutral" and maintained the "overweight"rating of UK and global financial sector. REUTERS