Sector movers: Oil Equipment stocks pace losses, analysts eyeing US elections
By Alexander Bueso
Date: Tuesday 29 Sep 2020
(Sharecast News) - Cyclicals gave back some of the previous session's gains with Oil Equipment and Bank stocks pacing losses.
Weighing on the former was a near 4% drop in crude oil futures after the US Department of Energy reported a 200,000 barrel a day fall in domestic US oil output to 10.7m b/d.
On that note, and against the backdrop of West Texas Intermediate futures trading below $40 a barrel, analysts at Capital Economics sounded a bearish note on the outlook for US oil production.
In their opinion, the challenges faced by many producers to find the necessary funding would crimp any rebound in US oil output.
"All told, we expect that US production will tread water through to year-end at around 11m bpd (see here), before inching up gradually next year. But even by end-2022, we think that it won't have reached its pre-virus level," Capital Economics's James O'Rourke said.
"And depending on the outcome of the November presidential election, we wouldn't be surprised if output never returns to pre-virus levels."
The analyst also pointed out the Democratic presidential candidate, Joe Biden's, strong bias towards renewables.
In the case of lenders meanwhile, a JP Morgan survey conducted mostly among asset managers and hedge funds revealed that on average they had increased their 'underweight' stance towards the group in Europe.
The majority of the survey's participants were from the UK, roughly 39%, 36% hailed from Continental Europe and 14% from the States.
"The conclusion from the responses is that investors have increased their UW positioning in the sector, with 75% of respondents that believe [return on tangible equity] will remain below 8% in 2022 (vs. JPMe 8.1%) despite a U shaped recovery and [cost of equity] of 8-12%.
"However, we also note that a material share of investors (45%) are looking to increase exposure, with the lift of the ECB dividend ban and the availability of COVID-19 vaccine seen as the main catalysts in our survey."
Top performing sectors so far today
Forestry & Paper 18,653.67 +3.47%
Gas, Water & Multiutilities 4,861.02 +2.24%
Electricity 7,114.84 +1.93%
Electronic & Electrical Equipment 9,163.12 +1.31%
General Industrials 5,677.42 +1.02%
Bottom performing sectors so far today
Oil Equipment, Services & Distribution 3,900.15 -2.95%
Real Estate Investment Trusts 2,403.84 -2.84%
Banks 1,852.29 -2.54%
Real Estate Investment & Services 2,357.56 -2.34%
Tobacco 28,830.66 -2.33%
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN