Danske Research Team notes that global equities advanced, with several markets near new all-time highs, in a volatile session dominated by macro data and Iran-related headlines. They highlight global cyclical outperformance, while in Europe defensives led and banks lagged despite higher rates, reflecting stagflation concerns after the flash PMIs. They also note that Asian markets are trading higher, led by Japan rather than the usual South Korea and Taiwan technology complex, as gains appear driven more by positive macro and reopening hopes than a classic tech rotation.

Cyclicals outperform while banks lag

"Equities moved higher yesterday, with several markets either close to or at new all-time highs. It was a volatile session where macro was clearly the most important story, but Iran headlines created the largest intraday swings and at times overshadowed the underlying macro message."

"Globally, cyclicals outperformed, but beneath the surface the rotation was highly interesting across regions, sectors and industries."

"In Europe, defensives led the market, and despite positive indices and higher rates, banks underperformed. That is a strong signal that the very stagflationary message coming out of the flash PMIs from Europe yesterday leads investors to worry that the ECB may be forced to hike rates for what equity investors would see as exactly the wrong reasons."

"This morning, Asian markets are higher. Worth noting is that Japan, rather than the usual South Korea and Taiwan tech complex, is leading the gains."

"The reason is that gains are driven by a positive macro and reopening hope trade more than a classic tech rotation. We see the same dynamic in European and US futures, which are also pointing higher, led by Europe ahead of the US, and again not led by tech."

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