LONDON (Reuters) - JP Morgan Cazenove has downgraded its position on euro zone equities to “neutral” from “overweight”, citing headwinds on the region’s stock markets from a weakening in the U.S dollar.
The dollar has fallen in recent sessions after the U.S. Federal Reserve last week held interest rates steady and cut in half the number of projected quarter-point hikes to just two this year.
The dollar’s weakness has in turn pushed up the euro on markets, which often has a negative effect on stocks since a stronger euro can impact the overseas exports of European companies.
“We reiterate our recent downgrade of Japan, and also downgrade Eurozone, from overweight to neutral. The region is still a crowded long, valuations are uninspiring, Euro is a headwind and ECB (European Central Bank) action is behind us,” said JP Morgan strategist Mislav Matejka.
Reporting by Sudip Kar-Gupta; Editing by Atul Prakash