INTERNATIONAL MARKET INTELLIGENCE | MORNING BRIEFING

Research evidence excerpt

INTERNATIONAL MARKET INTELLIGENCE | MORNING BRIEFING

encouraging that since the Iran conflict started, 2026 EPS projections for Europe have in fact

moved higher. The support in 2H is likely to be a continued rebound in activity indicators such as

PMIs, along with firmer global growth. We find that global investors don’t have much risk in

Europe. In terms of positioning, we keep positive call on Semis, Industrials and Mining. Banks

should also trade well, as they are leveraged to PMIs and to credit growth. If Eurozone PMIs

rebound, as we expect in 2H, then Defensives should generally not be favoured, and Energy

would have further downside if oil price moves lower. There is no valuation cushion between

Energy stocks and Brent. We remain cautious on Business Services, Software and Media. Also,

we are still not excited about Defense, having argued since last September to reduce it, post a

strong past run.

• Global Banks: Mythos-class era: Cybersecurity a bigger concern than credit risk.

Cybersecurity in Banks is currently one of the biggest undiscounted risks not reflected in Bank

valuations in our view, partly due to the limited disclosure available which leads to a lack of

comparability between banks on their preparedness or lack thereof to deal with emerging

cybersecurity risk (pre-event and post-event processes), driven by advanced AI capabilities such

as Frontier Models. While there is significant regulatory focus on capital ratios, we believe looking

at cybersecurity risk through the lens of the capital framework is not the best approach. In our

view, there should be an increased focus on cybersecurity driven liquidity risk and this should be

tested through increased infrastructure resilience testing and through a deposit-run liquidity haircut