Citi Downgrades UK Stocks to Underweight Citing Fading Geopolitical Premium

UK100-0.30%
According to Citi's strategy team led by Beata Manthey, on July 13 the bank downgraded UK equities from overweight to underweight in its global asset allocation, citing diminished appeal as geopolitical tensions ease. The team noted that UK stocks, weighted heavily toward commodities and defensive sectors, have become less attractive in an environment of broadening earnings growth and market leadership. UK equities comprise approximately 10% energy stocks and around 35% defensive holdings in healthcare and consumer staples. Since the U.S.-Iran ceasefire on April 8, the FTSE 100 index has significantly underperformed, reversing earlier gains driven by elevated oil prices.
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