⭐ Start off 2025 with a powerful boost to your portfolio: January’s freshest AI-picked stocksUnlock stocks

Fade the euro rebound, European stocks as 'carry trade blowup only the start': BCA

Published 08/13/2024, 06:52 AM
© Reuters

© Reuters

EUR/USD
-0.21%
EUR/JPY
0.01%
IT10YT=RR
1.59%
FR10YT=RR
1.07%
ES10YT=RR
1.32%

BCA Research is urging investors to be cautious about the recent rebound in European equities and German bond yields, warning that the effects of the yen carry trade blowup are far from over.

According to BCA, while the stabilization of the yen has led to a temporary relief rally, with investors flocking back to stocks and selling bonds, this move is "misplaced."

They state that the unwinding of yen carry trades triggered a global market sell-off, and BCA believes this will have a "lasting negative impact on global liquidity conditions."

This shock to liquidity, they argue, will soon crystallize the risks to global growth that they have been highlighting for months.

Given this outlook, BCA advises investors to "fade the rebound in European equities and German yields."

They also see the current strength in the euro as a selling opportunity. With the EUR/USD exchange rate reaching 1.10, BCA views this level as "an attractive selling opportunity," adding that EUR/JPY is also "vulnerable to additional downside."

When it comes to bonds, BCA notes that while the worst may be over for French bonds, the spreads over German bunds will remain volatile.

However, they recommend continuing to favor Spanish and Italian bonds over French ones.

Overall, the investment research firm believes that the yen carry trade blowup is just the beginning of a broader impact on the global economy and financial markets. As a result, they recommend selling the euro and fading the recent rebound in European stocks and German bond yields.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Which stock should you buy in your very next trade?

With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities.

In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record.

With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Unlock ProPicks AI

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.