HSBC cuts global equities to 'neutral' on Middle East, AI risks

HSBC (0005) on Monday downgraded its stance on global equities to "neutral" from "max overweight", citing renewed geopolitical tensions in the Middle East and worries over potential AI regulation ahead of the US midterm elections.

"We've been max overweight stocks and max underweight sovereign bonds since mid-March. Given the constant narrative bingo we just can't have the same level of conviction any longer," HSBC said in a note.

• HSBC double-upgraded developed-market sovereign bonds to "overweight" from "max underweight"
• Sovereign bonds could see support either from a potential AI slowdown if Democrats win or from gridlock in the midterms that could ease fiscal worries, HSBC said
• "Betting odds may well be too confident on a 'Blue Wave'. But if it does materialise, AI regulation concerns might be another near-term blow," the British brokerage said
• Among equities, HSBC is more cautious on the euro zone, citing concerns around France, and on emerging markets due to bearish AI sentiment in the region
• Separately, the brokerage cut its "overweight" stance on gold and moved oil higher to an "overweight" rating

Reuters

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