Lehman Brothers this morning downgraded continental European stocks to "underweight" from "overweight," while raising US equities to "overweight" from "underweight."
The brokerage cut its weighting in continental European stocks to 12 per cent from 24 per cent. It said an "expectation of rate rises in the Euro area, coupled with a deteriorating unit labour cost position and an associated margin squeeze, suggest cutting exposure."
Earnings revisions strongly favour US stocks at this point, Lehman said, adding US non-financial stocks look cheaply priced relative to continental European peers.
It raised its weighting for US equities to 52 per cent from 42 per cent.