LIVE MARKETS-Healthcare "stand out" sector among cheap-looking European defensives - RBC BlueBay AM

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HEALTHCARE "STAND OUT" SECTOR AMONG CHEAP-LOOKING EUROPEAN DEFENSIVES - RBC BLUEBAY AM

European defensive stocks are starting to look cheap from a multi-year valuations perspective, said RBC BlueBay Asset Management's head of the European equities David Lambert, who highlighted healthcare as a standout sector among them.

Europe's economically-exposed cyclical stocks have been on a tear in 2025; up 22.4%, versus a 12.8% rise for their defensive counterparts. .MIEU0CY00PUS, .MIEU0DE00PUS

And for a change, the outperformance isn't all about PMIs.

"What's been more key for the cyclicals right now has been what has been going on domestically particularly with Germany," said Lambert.

Germany announced a massive boost to fiscal spending earlier this year.

"Industrials and within that defence, construction, banks: they’re the main, principle drivers," said Lambert.

On the flipside, consumer staples, including beers and spirits, have seen weaker performance, while healthcare has been a particularly soggy part of the market as of late.

A basket of European healthcare stocks is down 3.5% this year SXDP, underperforming the STOXX 600, up over 8%.

"Defensives are still lagging, but within that, you’ve now got a valuation disparity where defensives are looking cheap relative on a multi-year levels," said Lambert, who even so said the time doesn't feel right yet to add exposure.

Some of the cyclicals will continue to run if earnings momentum stays positive, said Lambert, but any normalisation might see a gap close.

Closely-watched euro zone PMIs figures were out on Tuesday, falling to 50.2 in May from 50.4 in April, higher than a preliminary estimate of 49.5 but its weakest since February.

(Lucy Raitano)

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