Base rate cuts not a cure for real estate firms
STOXX 600 up 0.8% to new peak
DAX and FTSE also at records
Wall St futures higher
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BASE RATE CUTS NOT A CURE FOR REAL ESTATE FIRMS
As expected, Sweden's central bank made its first rate cut since 2016 on Wednesday but Barclays says that cuts alone are not the panacea for the struggling real estate firms, and encourages focus on fundamentals instead.
"The day after base rate cuts ... focus on fundamentals," the British bank says in a note, as real estate stocks are down and swap rates moved higher.
Castellum CAST.ST, seen as a rate hedge, closed 0.11% down on Wednesday and is 1.3% lower by 0832 GMT.
"Our long-held view that base rate cuts don't matter due to the inverted rate curve appears to be vindicated," Barclays adds.
The analysts, who stick to their "neutral" view on European real estate, say that the steepening of the rate curve that they anticipated has started, and expect this to continue.
"We believe the market can and will now focus increasingly on property and company fundamentals, rather than be beholden to the gyrations in the rates market," they say.
Still, it sees the fundamentals as deteriorating for office-exposed landlords, and as inflation is easing, says it believes the inflation-linked revenue growth will not offset higher finance costs.
It cuts Castellum to "underweight" from "overweight" to reflect the weakening operational performance and declining earnings.
(Anna Pruchnicka)
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FOR FRIDAY'S OTHER LIVE MARKETS POSTS:
NEW RECORDS FOR STOXX 600, FTSE 100 AND DAX; CAC CLOSING IN ON FRESH PEAK CLICK HERE
EUROPEAN SHARES SET TO END STRONG WEEK ON A HIGH CLICK HERE
RATE CUT HOPES FAN RISK RALLY CLICK HERE
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