Time to Root for French Stocks Over German Peers, Barclays Says

(Bloomberg) -- The DAX’s glory days may be numbered.

The German benchmark’s outperformance in Europe this year could be at risk if the U.S.-China trade war escalates, Barclays strategists wrote in a note on Wednesday, closing their overweight rating on the index and recommending that investors switch to France’s CAC 40 Index. The DAX’s 14% jump in 2019 to date puts it among the world’s top 10 primary indexes by percentage gain.

China is Germany’s biggest trade partner outside Europe, and the carmaker-heavy DAX was particularly prone to swings in May on headlines about potential U.S. levies on the automobile industry. France has more diversified exposure to sectors and regions, according to Barclays strategists led by Emmanuel Cau.

The strategists also reiterated a preference for Spanish equities over those in Italy, citing persistent political concerns and a “fragile” fiscal situation in the latter. And they raised U.K. stocks to overweight versus euro-area stocks, saying the British market is biased toward defensive and commodity sectors and has attractive relative valuations.

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