HSBC upgrades EU stocks, downgrades EM on increased volatility

HSBC has adjusted its global regional equity stance by closing its overweight in emerging market stocks and upgrading eurozone equities to overweight, while keeping a maximum overweight on global equities overall. The bank cited increased volatility in EM Asia, concerns that AI capex cuts could pressure semiconductor stocks and, by extension, EM equities. In contrast, HSBC sees support for eurozone shares—especially banks—from lower growth expectations and a weaker euro over the summer. The note remains broadly constructive on risk assets, arguing neutral sentiment and positioning could leave room for upside into Q2 earnings season. It also expects U.S. exceptionalism to fade somewhat in late Q3, which markets may initially view favorably in a Goldilocks-style environment. Overall, the message is mildly positive for European equities, negative for EM, and broadly supportive of global risk assets.