Live Markets: Japan: small (and medium) is beautiful

Astrazeneca Pharma India

06/02/2025 10:44

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      STOXX 600 hits record, up 0.8%
    

        * 
      Soc Gen, AstraZeneca rise on earnings
    

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      BoE set to cut rates
    

        * 
      Wall St futures edge higher 
    

  
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    JAPAN: SMALL (AND MEDIUM) IS BEAUTIFUL
    Japan's large-cap stocks have outperformed small- and mid-cap stocks (SMIDs) since the
pandemic. Citi thinks the headwinds that SMIDs face and the tailwinds large-caps have enjoyed
are unlikely to fade completely, but they do expect them to wane.
    "Large caps have outperformed markedly since 2021, even as the relative EPS between the two
groups of stocks has held flat," Citi notes. 
    In contrast, when SMIDs outperformed in the period after the global financial crisis, the
outperformance tracked an improvement in the relative EPS of SMIDs to large-caps.
 
    Citi pinpoints three reasons for a possible resurgence in SMIDs.     
    "First, we note Japanese tech stocks are already lagging the U.S. Mag 7 and there are doubts
over whether they can maintain a strong performance," Citi writes. 
    "Second, Citi’s house view is that Japan’s long-term interest rates are likely to rise
further while US long-term rates peak out."
    "Third, small/mid-cap stocks could outperform on a global level if US long-term rates fall
and the gap in business conditions between the manufacturing and non-manufacturing sectors in
the US narrows."    
    (Samuel Indyk)
    *****     
    
    EARLIER ON LIVE MARKETS:    
    BUY EUROPE: STOXX, FTSE SCALE NEW PEAKS CLICK HERE
    BEFORE THE BELL: MIXED BANK EARNINGS, BOE AWAITED CLICK HERE
    FOCUS SWINGS BACK TO RATE MOVES, COMPANY EARNINGS CLICK HERE

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Eu open    https://tmsnrt.rs/3Q7Peam
Japan's large-caps outperform    https://reut.rs/3CHjsxY
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