LIVE MARKETS-Citi flags consolidation risk as dispersion surges

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CITI FLAGS CONSOLIDATION RISK AS DISPERSION SURGES

Last week, European stocks endured a challenging stretch marked by outsized stock swings, sharp rotations and a renewed bout of AI anxiety, driving a surge in performance dispersion that Citi says could lead to some consolidation ahead.

The U.S. bank said there was nearly a 20% gap last week between the best and worst-performing industries in the MSCI Europe index, even as regional benchmarks eked out modest gains.

"In the past, rising dispersion environments have seen global equities trade flat-to-down on a 1-3m horizon, while still rising 6m later," write Citi strategists in a Friday note.

While volatility could become a feature this year, Citi is still constructive into year-end and expects equity market performance to broaden.

The bank is overweight emerging markets and Japan, neutral on Europe, and says global IT looks increasingly attractive in its allocation models following the selloff in software stocks.

For more on how the global AI trade is starting to fracture, check out this graphic piece.

(Danilo Masoni)

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