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CITI SCRAPS LONG EUROPEAN EQUITIES RECOMMENDATION

Citi have removed their recommendation to be tactically long European equities following the latest strikes in the Gulf and U.S. President Donald Trump saying he believed an interim ceasefire with Iran to be "over".

The news sent oil up 5% on Wednesday, causing a sharp sell off in European government bonds, and weighing on stocks.

"This oil spike may eventually be a fade. Having said that, for now, the market is poorly positioned for a move up in oil, with long carry trades in various forms popular for a supposedly quiet summer. We therefore take off some risk in our trading book," Citi analysts including Alice Zheng wrote in a note published in U.S. hours on Wednesday.

One such position is a European equities long, which they had recommended after the U.S.-Iranian Memorandum of understanding, "given lower oil prices and Europe's improving terms of trade.

"Now once again, without a strong AI exposure, European equities have been left at the mercy of oil moves and (volatility)," Citi wrote.

"If the rally in oil continues the pullback in European equities can be significant having priced out most of the conflict."

Not everyone agrees of course. UBS on Thursday raised its year-end target for European stocks citing resilient earnings and AI-driven upgrades.

(Alun John)

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