Danske Research Team reports that equities continue to grind higher, led by US and tech names, while cyclicals outperform and consumer staples lag. The rally is highly selective across sectors and regions, with US markets outperforming Europe. They expect this pattern to persist as geopolitical, macro and earnings factors all point in the same direction.

Growth tech leads, defensives lag

“Equities moved higher again yesterday, and again led by the US and tech, in what was a bit of waiting game before a storm of central bank meetings this week, earnings reports and macro data as we move further in. Cyclicals outperformed again, though not the deep cyclicals. “

“As we have highlighted before, growth tech and the broader growth segment are carrying markets at the moment. At the other end of the spectrum, consumer staples were the worst-performing sector yesterday.”

“Consumer-related sectors are still struggling with the second-round effects from tariffs, and now also with the more immediate direct impact from higher oil prices, which effectively acts as a tax on the consumer.”

“This also means that the equity rally remains highly selective. We expect that to continue for now, as the geopolitical, macro and earnings factors are all pointing in the same direction.”

“The rally is not only more sector-divergent; it is also becoming more regionally divided. Yesterday, the US outperformed, with cyclicals rising, while Europe underperformed and defensives did better.”

“This morning, Asia is mixed, once again driven by country and sector exposure, with tech higher. Japan is lagging after this morning’s Bank of Japan meeting where the 6-3 vote split and a slightly more hawkish tone have pushed the yen stronger.”

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