Funds Go Long Yen for First Time in Four Year

Economic

Summary:

By one measure, the speculative Japanese yen-funded carry trade has been completely unwound...

By one measure, the speculative Japanese yen-funded carry trade has been completely unwound.

The latest Commodity Futures Trading Commission data show that hedge funds and speculators have flipped their long-standing short yen position and are now net long of the currency for the first time since March, 2021.

It may have taken a lot in recent weeks to prompt the turn - a hawkish Japanese rate hike, yen-buying intervention and a burst of safe-haven demand amid the historic spike in U.S. stock market volatility early this month - but the flip was quick.

Data for the week ending August 13 show that funds held a net long position of just over 23,000 contracts, effectively a bullish bet on the currency worth $2 billion.

Just seven weeks ago they were net short to the tune of 184,000 contracts. That was their biggest short position in 17 years, a $14 billion bet against the currency. The scale and speed of the bullish momentum shift in July and so far this month is historic. Funds Go Long Yen for First Time in Four Year_1

Funds Go Long Yen for First Time in Four Year_1

Funds Go Long Yen for First Time in Four Year_2

A short position is essentially a bet that an asset will fall in value, and a long position is a wager its price will rise.

As analysts at Rabobank point out the yen was the best-performing G10 currency against the dollar in July, rising more than 7%. But it has begun to ease lower again as the vol shock of August 5 fades and investors recover their appetite for risk.

The question now is whether CFTC funds and speculators more broadly are inclined to go back into yen-funded carry trades or not. There are persuading arguments on both sides.

Funds Go Long Yen for First Time in Four Year_3

The bar to extending long yen positions and for further yen appreciation may be higher. The U.S. economy is still growing at a decent clip - a 2% annualized rate, according to the Atlanta Fed GDPNow model's latest estimate - and the dollar's interest rate and yield advantage over the yen remains substantial.

The yen 'carry' trade - selling the yen to fund the purchase of higher-yielding currencies or assets - is an attractive strategy from a fundamental perspective despite the recent turmoil.

"We still hold the view that it is hard for the Dollar to go down (or to be bullish Yen) substantially or durably in the current environment," FX analysts at Goldman Sachs wrote on Friday.

On the other hand the recent turmoil is not in the rear view mirror completely, and volatility may stay above pre-August 5 levels for some time yet. This is bad for carry trades, which rely on low and stable volatility.

Measures of implied volatility in dollar/yen from one week to six months out are all higher, especially further out the curve. It may take a more meaningful decline in volatility before speculators consider shorting the yen again.

And figures on Friday are expected to show that inflation in Japan climbed to 2.7% last month, the highest since February, likely to keep the Bank of Japan minded to continue tightening policy. All while the Fed is about to start cutting rates.

"While the (U.S-Japanese) rate spread will remain attractive, the danger is that we have entered a period of more sustained volatility that will encourage further liquidation of yen carry positions over the coming months," Morgan Stanley's FX strategy team wrote on Friday.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Owen Li

Commodity

A steel-industry crisis in China is sending iron ore prices tumbling. Meanwhile, soybean stockpiles are at a record high in the Asian nation. In the US, a hot summer is raising demand for natural gas.

Here are five notable charts in global commodity markets to consider as the week gets underway.

Iron Ore

Iron ore is trading at the lowest level since 2022, making the steel-making staple one of this year's worst-performing commodities.

Shanghai rebar futures have collapsed to a seven-year low amid weakening demand from China, the world's largest steel market, as officials battle a property crisis.

Top producer China Baowu Steel Group warned of a worse challenge for the industry than major downturns in 2008 and 2015. Market watchers including Macquarie expect iron ore to remain under pressure as global supplies appear to be running ahead of demand.

Natural Gas

The US reported its first summer weekly withdrawal of natural gas stockpiles since 2016 and the first for this time of year in at least a decade.

A hot summer has caused people to blast their air conditioners, boosting demand for gas to power the plants that support the electricity grid.

The supply drop is a tell-tale sign that gas, which has traditionally been thought of as a heating fuel, is becoming increasingly critical to keeping the lights on and air-conditioners blowing in hotter months.

China Soybeans

China made its largest purchase of US soybeans for the new crop since 2023 last week, adding to a mountain of inventories.

Still, the Asian nation has been slow to secure US supplies of the crop farmers start harvesting next month, with outstanding volumes at the lowest since Donald Trump's trade war years.

China has shifted away from US purchases over the past few years, taking advantage of bumper Brazilian crops. It's set to start the 2024-25 marketing year with enough soybeans to cover more than a third of its demand for the season - the most since at least 2004.

Nuclear Power

The global nuclear industry has experienced a renaissance in recent years, with more than 80 designs for small modular reactors (SMR) under development.

But BloombergNEF doesn't anticipate SMR's arrival on the grid until the 2030s, due to costs and regulatory challenges.

Meanwhile, reactor projects, particularly in the West, are consistently running behind schedule and costing more than imagined. Electricite de France SA's Hinkley Point C plant is still under construction and NuScale Power Corp.'s Idaho-based project was terminated due to high costs.

Mexican Oil

Oil output from Mexico's Petroleos Mexicanos has slumped to about half its peak from 20 years ago.

It's a bad sign for the state-owned driller, whose conventional assets are running dry as it tries to dig itself out from under a nearly $US100 billion debt burden. It now may be shifting focus to work more closely with the private sector, reaching a deal with driller CME Oil and Gas to explore deeper into two mature fields in the Gulf of Mexico, a plan that aims to increase output from them 10-fold by 2028.

Source: Bloomberg

Risk Warnings and Disclaimers

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Alex

Stocks

Data this week was about as good as even the most optimistic bull might have hoped for and any remaining bearish technical signals were put to rest with the S&P500's (SPY) move through 5390-400. There have now been 7 higher closes in a row and it appears a new leg of the bull market is underway.

The early resumption of the rally may be frustrating for many who missed the bottom. I'm unfortunately in this camp - after calling the top and a correction to 5265, I was all set to load up again, but of course the market didn't give me a nice little dip to buy. The "crash" on August 5th got me overly cautious and I am now underinvested. I'd love to see another big dip, but I'm also looking at alternative ways to buy, even when the S&P500 is approaching its all-time high; it doesn't tend to give buyers a second chance.

This week's article will identify new inflection points. These can help keep you on the right side of the trend and can be used to enter trades with minimal risk, even when the market has moved a long way. Various techniques will be applied to multiple timeframes in a top-down process which also considers the major market drivers. The aim is to provide an actionable guide with directional bias, important levels, and expectations for future price action.

S&P 500 Monthly

The August bar has not only traded back into the July range above 5390, but is now back in positive territory. There are still 2 full weeks to go until the monthly close, but at this juncture, a bullish bar has formed and only a close below 5390 will shift it neutral/bearish.

I'm slightly surprised at the brevity of the correction in August. The monthly exhaustion took 8-9 months to set up, and came in confluence with a weekly signal and the major Fib extension at 5638. It was a full house of bearish signals and might still have some lingering effects which cap the gains over 5669.

The next major target is the 6124 level. This is a measured move where the 2022-2024 rally will be equal in size to the 2020-2022 rally. It is unlikely to be reached this side of the election, but is a possible destination at some point in this bull market.

SPX Monthly (Tradingview)

5638 and the 5669 are major resistance points.

5390 and the August low of 5119 are initial supports.

The August bar will complete the upside Demark exhaustion count. It may have played out already with the correction of nearly 10%, but its effect could linger and limit rallies ahead of the election.

S&P 500 Weekly

Last week's article highlighted the need for a "higher low, higher high and higher close over 5344, ideally 5400" to confirm a reversal. These were provided emphatically in a very bullish weekly bar. The close at the highs suggests the rally will follow through early next week.

The comparison with the initial drop from the 2022 top (highlighted) is still valid, but less compelling with this week's strong action. A large drop next week would be needed to keep this comparison relevant,

SPX Weekly (Tradingview)

Initial resistance comes in at 5566 and is likely to be tested early next week.

The 20-week MA and low of last week are initial support at 5324.

Next week will be bar 2 (of a possible 9) in a new upside Demark exhaustion count.

S&P 500 Daily

The S&P500 is nearly back where the 3-day crash (if we can call it that) originated at 5566. It's obvious resistance, but so was the 5390-400 area which was cut through last week like it was nothing. This is similar action to early November '23 and to early May '24 when the rally gapped over resistance points and maintained strong momentum.

Rallies tend to slow when they reach the area of the preceding top and a clean break of 5669 looks unlikely. Expect shallow dips until this level is reached.

SPX Daily (Tradingview)

5566-85 is the first resistance, then the 5669 peak.

On the downside, the gap at 5500 is potential support, followed by 5463-70 at the high volume area. The 5390-400 area is still relevant; a break below this level would put the recovery into question.

An upside Demark exhaustion will be on bar 7 (of 9) on Monday. A reaction is often seen on bars 8 or 9 which means a pause/dip gets more likely from Tuesday onwards.

Drivers/Events

The data was so good this week, a 50bps cut in September has been priced out and the odds of a 25bps move have risen to 75%. US Core PPI came in at 0.0% when 0.2% was expected, CPI stayed at 0.2%, but most important of all, Unemployment Claims came in lower than expected at 227K, some way from the danger area of 250K. Panic over the labour market seems premature. Importantly, yields moved lower again, this time for the right reasons (low inflation).

Data next week is on the quiet side and should allow the current move higher to continue. FOMC Minutes are due for release Wednesday while Thursday will bring PMIs and Unemployment Claims - the stronger the better for the S&P500. Fed Chair Powell is scheduled to talk at the Jackson Hole Symposium on Friday. While no surprises are expected, it will be interesting to hear the Fed's view on recent events; will they push back on the dovish repricing and expectations for aggressive cuts? Probably not.

While the data may be positive, concerns over valuations, the economy and the election could cap the upside. Remember the July top formed on good news (CPI), and the August bottom came when things looked their worst. The reaction to data often depends on the technical context (positioning).

Probable Moves Next Week(s)

The bullish bigger picture view is firmly intact and it seems the expected H2 correction has played out already. New all-time highs are expected in the coming weeks, although the trend above 5669 may be limited by the continued effect of the monthly exhaustion signal and concerns over the labour market/economy. Election uncertainty is also likely to cap rallies. I'm anticipating an initial break of 5669 will fail and then lead to a much slower drift higher to form a wedge pattern.

Short-term, resistance at 5566-85 should be reached early next week. A daily exhaustion signal should then lead to a pause and dip, but 5500 ideally holds to set up continuation to 5669 where a longer consolidation is likely. Assuming this scenario plays out reasonably well, I would buy near 5500 and add if 5463-70 is reached.

Should 5390-400 break, it would mean my conclusions of a strong move to 5669 are wrong and the S&P500 is still in a correctional phase. Although this would be disappointing, it could provide an opportunity to buy during a deeper dip and I may get a second chance after all.

Source: SEEKINGALPHA

Risk Warnings and Disclaimers

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Thomas

Forex

Political

The Thai baht's recent rally is under threat as markets digest the nation's latest political drama ahead of this week's central bank policy meeting.

The baht has been one of the region's top performing currencies since the start of July — aided partly by a rebound in tourism — after hitting a near two-year low against the dollar in May. The resurgence may be derailed however, following a tumultuous period that included Paetongtarn Shinawatra winning a parliamentary vote to become the new prime minister, while a court ousted her predecessor.

"We maintain our bearish view on the baht, looking at 36.0 by year end,” said Jeffrey Zhang, emerging markets strategist at Credit Agricole CIB HK Branch. "Thailand's growth could still struggle to get back to trend, and we see a risk of a lower neutral rate given the long-term structural growth impediments.”

The baht's recent gains against the greenback are also looking technically vulnerable. The currency pair is now in oversold territory, according to a momentum indicator, with some forecasters seeing it as weak as 37.5 per dollar by the end of the year. The baht closed at 34.6 on Friday.

Traders will now turn their attention to the Bank of Thailand's (BOT) upcoming policy decision this week, with the central bank expected to keep interest rates unchanged at 2.50%. Narrowing yield differentials between Thailand and the US, as markets price in possible Federal Reserve interest-rate cuts in September, may offer support for the baht.

However, even if the BOT stays on hold, that may not be enough to stop the Asian currency from weakening in the near-term amid the political angst.

"After recent strong gains, the baht could face resistance to additional strengthening,” said Moh Siong Sim, an FX strategist at Bank of Singapore Ltd, who sees the currency moving toward 36.0 per dollar by the end of this quarter. "US election risks could see dollar strengthening back, especially under a Trump 2.0 scenario,” added Sim.

Concerns over Thailand's elevated household debt and investment attractiveness remain a high priority for market watchers. Paetongtarn, a daughter of former Thai leader Thaksin Shinawatra, has advocated for lower interest rates and slammed the central bank as an "obstacle” to resolving the country's economic issues. There are also reports that the new government may scrap a US$14 billion (RM61.52 billion) digital cash handout program.

"With Paetongtarn securing enough votes for PM, political uncertainty has dissipated for now,” Shreya Sodhani, a regional economist at Barclays plc, wrote in a client note on Friday. "We now expect the digital wallet plan to be scrapped, which would imply that the full year 2025 budget faces some delay.”

Source: Bloomberg

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Devin

Energy

Utilities in Portugal have cut the proportion of electricity production from fossil fuels to just 10% so far in 2024, leap-frogging neighbour Spain to emerge as western Europe's second-cleanest large power sector behind France.

Total clean electricity generation through the first seven months of 2024 jumped 32% from the same months in 2023 to a record 21.76 terawatt hours (TWh), data from energy think tank Ember shows.

Europe's Savvy New Clean Energy Champion_1

Record output from solar and wind farms plus the highest hydro generation total since 2016 have been the main drivers of the clean power surge, which allowed generators to slash natural gas-fired output by 60% from the January to July period in 2023.

Europe's Savvy New Clean Energy Champion_2

Portugal's power firms have also lifted total electricity generation by 7% to the highest since 2021, demonstrating that a multi-pronged approach to boosting clean generation can trigger rapid progress against energy transition targets.

Turnaround

The deployment of some of Europe's largest new hydro dams and solar parks this year has been instrumental in accelerating the cuts to fossil fuel use in Portugal's generation mix.

Both the 1,158 megawatt (MW) capacity Tamega dam and the 202 MW capacity Cerca solar farm commenced operations this year, which allowed power firms to cut total fossil fuel-generated electricity to just 2.53 TWh so far this year through July.

Europe's Savvy New Clean Energy Champion_3

That fossil-fired total is down 59% from the same period in 2023, and is the lowest on record.

Total power sector emissions have dropped sharply as a result, to 2.12 million metric tons of carbon dioxide for the first seven months, which is 45% less than the same months in 2023 and a new record.

Hydro Help

Both the new Tamega facility plus higher precipitation levels have helped steer Portugal's hydro generation higher this year.

Europe's Savvy New Clean Energy Champion_4

Through the first seven months of 2024, pumped storage output was up 67% to 172,758 megawatt hours (MWh), while run-of-river generation was 70% higher at 259,415 MWh, according to LSEG.

Reservoir-based hydro generation was 76% up at 117,024 MWh.

Europe's Savvy New Clean Energy Champion_5

All told, the cumulative gains in Portugal's hydro generation allowed hydropower's share of the electricity generation mix to average 35.3% so far this year, compared to 20.7% during the same period in 2023, Ember's data shows.

Solar and wind assets have also seen their shares of the utility generation mix climb.

Solar power generated an average share of 13.3% of Portugal's electricity so far this year, up from 10.6% in 2023, while wind farms accounted for an average share of 33.1%, up from 32.6% in January-July 2023.

And clean power's share of the generation mix looks set to keep growing, following new proposals by Portugal's government to increase the weight of renewables in power production.

As part of goals to become carbon neutral by 2045, renewables will generate 51% of the country's final energy needs by 2030, the government said last month.

Innovative deployments of renewable assets on existing energy projects look set to help achieve those goals.

The award-winning Alqueva floating solar park integrates hydro power, floating solar and battery storage that can generate 7.5 gigawatt hours (GWh) of clean energy annually.

And a planned 274 MW capacity wind farm incorporated into the Tamega dam project will generate enough clean power to meet the annual energy needs of 128,000 homes, according to developer Iberdrola.

Further expansions in Portugal's solar capacity is also expected following a planned project with The Nature Conservancy to identify optimal solar farm sites, and the country is also exploring offshore wind site suitability alongside upgrades at existing onshore farms.

In combination, this mix of current momentum and planned growth looks set to push Portugal even higher up the list of Europe's clean power champions, and help the country establish itself as a global energy transition leader.

Source: Reuters

Risk Warnings and Disclaimers

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Cohen

Economic

Central Bank

The stock market crash is — perhaps — the long awaited signal of a US economic slump. For President Joe Biden's administration and Kamala Harris' presidential campaign, the timing could not be worse. For years, they have tried to sell their economic record as a success story. With markets in decline and unemployment rising, that sale just went from hard to impossible.

The market meltdown and impending recession came over two full years after the US Federal Reserve started hiking interest rates to "fight inflation". They are the direct, but delayed, consequence of that policy. So, the Fed's policy is finally having its intended effect — over two years after inflation peaked and began to fall, for reasons unrelated to the Fed's policy.

Will a recession come now? For at least 40 years, an inverted yield curve on US Treasuries has been a reliable indicator of recession in America. In 1980, 1982, 1989, 2000, 2006 and 2019, the interest rate on 90-day Treasury bills rose above that on 10-year bonds and a slump followed within a year. In all cases after 1982, the inversion was over when the recession arrived, but it arrived nonetheless.

This happens because when the Fed raises short-term interest rates, credit for business investment, construction and mortgages begins to dry up. Why lend at 4% or 5%, or even more, with risk, when you can park your cash, risk-free, at 5%? Other factors, including a rising dollar (bad for exports) and interest resets on old loans (bad for credit card and mortgage defaults, notoriously in 2007/08), also play a role. Eventually, long-term rates start to rise and the inversion ends, but then high long-term rates do further damage.

In this cycle, while the yield curve inverted in October 2022, no recession ensued — until now. Offsetting forces supported the economy, including very large fiscal deficits, the payment of interest on a historically large national debt and the direct payment of interest (since 2009) on very large bank reserves. The economy rolled along, despite the Fed's best efforts to slow it down.

No more. Unemployment is up almost a full percentage point over the past year and job creation is way down. The number of newly unemployed, newly employed part-time for economic reasons and those not in the labour force but wanting a job increased by over a million from June to July. Claudia Sahm's indicator of recession — a half-point increase in unemployment on a three-month moving average basis — is blinking red. The Sahm rule has held since at least 1960.

In 2007, two co-authors and I studied the history of Fed behaviour in response to economic conditions. We found that, contrary to rhetoric, after 1984, the Fed ceased reacting to inflation (to be fair, there was not much to react to). Instead, the Fed would raise short-term interest rates in response to a low or falling unemployment rate — the classic concern of bosses who fear their workers may demand higher wages or desert them for better jobs.

Most important, we tested whether the US presidential election cycle had a statistical effect on the yield curve after controlling for inflation and unemployment. We found — in every model we tried — that there was a distinct and strong effect: in presidential election years, the Fed pursues an easier policy if the Republicans hold the White House and a tighter one if the president is a Democrat. Specifically, our model predicted a tightening effect of about 1.5 points when the unemployment rate is low, with an additional 0.6 in a presidential election year when the Democrats hold the White House, compared to an easing effect of 0.9 if the president is Republican. Thus, in an election year with low unemployment, the predicted swing is about three percentage points in the yield curve.

In all key respects, our 17-year-old model predicts the current situation. From bosses' point of view, unemployment has been disturbingly low. And a Democrat is in the White House. The yield curve is inverted by about 1.5 percentage points. We therefore would have expected a flat yield curve if the president were a Republican and a positively sloping curve — the normal situation — if unemployment had also been higher. Statistically speaking, the model explains why the Fed has stubbornly refused to lower interest rates, despite the steady decline in the inflation rate.

Democratic presidents have no one to blame for this but themselves. For decades, they have deferred to the Fed as the "fight inflation" institution. For decades, they have reappointed Republican chairs: Alan Greenspan, Ben Bernanke and Jerome Powell. Beyond the chairs, bankers and economists are strongly represented on the Fed's Board of Governors and in the regional Federal Reserve Banks.

These people may see themselves as non-partisan high priests, but they are broadly aligned with Wall Street and against the interests of workers. The result, predictably, is the recurrent paralysis of progressive economic policy.

Back when Democrats took workers seriously — roughly the late 19th century through the 1960s — they understood that Big Finance had to be confronted and controlled. From the 1930s until the late 1970s, America had regulations and regulators committed to that task. But this dispensation was largely swept away in the 1980s, and since the Bill Clinton era, the Democratic Party has left the Fed alone — and received a lot of Wall Street cash in return.

This presidential campaign has seen a lot of twists and turns. The Fed's economic shock — if it continues to develop — will be another big one. Given the possible effect come November, Democrats may now face another long period out of office. May they use it, if they must, to reflect on the unwisdom of their 30-year bargain with Big Finance.

Source: The Edge Malaysia

To stay updated on all economic events of today, please check out our Economic calendar

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Devin

Economic

Stocks

European companies likely grew earnings for the first time in five quarters, but concerns about the strength of the consumer and the economic outlook have cast a pall over the second-quarter earnings season.

According to LSEG I/B/E/S data, Q2 earnings are expected to have increased 4.3% from the same period last year, the first quarterly rise since the first three months of 2023. Almost 55% of company results beat analyst estimates, broadly in line with a typical quarter. From Tech to Banks, Five Lessons from Europe's Q2 Earnings Season_1

From Tech to Banks, Five Lessons from Europe's Q2 Earnings Season_1

Here are five key takeaways:

1/ Earnings Misses Punished

European companies which failed to meet expectations have been punished.

The median one-day share price reaction to financial results misses was a 4.4% drop, while the gain on a beat was only 2%, Morgan Stanley research shows.

"The reason Europe has had this negative price skew to earnings, which at one point was quite disproportionate to long-term history, is on the back of risk-off sentiment due to the recent market growth scare," said Morgan Stanley chief European equity strategist Marina Zavolock, noting, however, that the negative skew was starting to abate.

2/ Cyclicals Vs Defensives

Investors began rotating out of cyclical stocks into defensive ones in April, a trend that has accelerated in recent weeks in a sign that weaker growth is anticipated.

Sectors such as autos and travel and leisure usually rise or fall with economic activity, while investors generally see sectors such as utilities, consumer staples and health care as a safer bet during a downturn.

A basket of European cyclical stocks is up 2.2% since mid-April, underperforming defensives which have risen 10% in the same period.

"With worries about a hard landing resurfacing, poor performance for cyclicals may not be fully over," said Barclays head of European equity strategy Emmanuel Cau.

Shares in German auto firms BMW and Volkswagen slumped to multi-year lows in August as weak demand weighed.

From Tech to Banks, Five Lessons from Europe's Q2 Earnings Season_2

"The autos sector is the poster child of the cyclical pullback in Europe," said Andreas Bruckner, European equity strategist at Bank of America Global Research. "The sector has had a disastrous couple of months in terms of performance, including a number of high profile profit warnings."

3/ Luxury Sector Hit

Profit warnings from Burberry, Swatch, Hugo Boss and other high-end names have been driven mainly by weakness in China, where Mamta Valechha, consumer discretionary analyst at wealth manager Quilter Cheviot, says luxury spending remains about 20% below pre-COVID levels.

This has dashed hopes of a recovery in the world's second biggest economy in the second half of the year.

"Any improvement in China consumer sentiment would need to come via policy efforts directed towards consumption," Valechha said. "This would perhaps lead to a strong recovery in luxury demand after two years or more of saving."

4/ Banks Reap Rate Rewards

European banks, hurt by the ultra-loose monetary policy of the past decade, are finally getting their moment in the sun thanks to the recent surge in interest rates.

The sector's earnings have grown over 15% in Q2, compared with 13% over Q1, according to LSEG I/B/E/S.

"Most sectors are seeing net downgrades at this point, but European banks and financials are still seeing net upgrades," said Citi's global equity strategist David Groman. "It's one sector where earnings momentum still looks really strong compared to the rest of the market."

European banking shares rose to their highest level in nine years in July. They fell in early August as U.S. recession fears gripped markets but are still up more than 12% so far this year, outperforming the broader market. From Tech to Banks, Five Lessons from Europe's Q2 Earnings Season_4

From Tech to Banks, Five Lessons from Europe's Q2 Earnings Season_4

5/ Tech Struggles

The tech sector was the biggest negative contributor to Europe's second quarter earnings growth, with a drop of almost 30% from the same period a year ago, LSEG I/B/E/S data showed.

But much of this year's expected growth has been pushed further out into 2025 and analysts remain upbeat.

ASML, Europe's largest tech company, saw a 19% decline in net income in the quarter, but its CEO said 2024 was a "transition year" as it looked to a strong 2025.

"European tech companies have had worse earnings revision momentum than the rest of the world so there is something happening in European growth specifically that looks a bit different to elsewhere," said Citi's Groman.

"You're still looking at growth at about 40% next year so it should be one of the fastest growing sectors and that's why we still like European tech."