European bank stress test as catalyst for a new medium-term uptrend? No!

- "In the short term, the hopes being pinned on a successful bank stress test will improve the chances on an improvement in the sector’s relative performance. The positive medium-term impact on overall market is, however, likely to remain slight, since it can neither change the pending deterioration in the growth dynamic nor defuse the causes of the tensions in the euro zone."
- "The dependence of some national banking systems on funding via the euro system remains high. This points to further potential risks for the equity market because of tensions in EMU."
- "By the end of July, roughly 65% of the S&P 500 companies will report on the development of business in 2Q (Euro STOXX 50: 50%). The earnings estimates for 2010 will likely remain supported; the estimates for 2011 will come under pressure from expected weaker macro data."
- Outlook: "In the coming months, we think weaker macro data will, on balance, result in new lows for the year. Within this picture, however, there is the chance in the coming weeks of a temporarily friendlier trend because of the concentration of (positive) corporate reports on 2Q."
- STOXX Europe 600 sectors: "Financials are stabilizing; ahead of the stress tests we are upgrading Banks and Financial Services from underweight to neutral. At the same time, we are downgrading Travel & Leisure from overweight to neutral, and Construction & Materials from neutral to underweight."
Unicredit Market Outlook 20100708

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