European banks are well positioned to benefit from the ECB’s first interest-rate increase in nearly three years, analysts at Keefe, Bruyette & Woods wrote in a research note Friday. The ECB raised its benchmark rate Thursday, and investors expect at least one more hike before year-end. KBW analysts said credit risks appear contained while inflation expectations are rising and economic-growth forecasts are being cut by a lesser extent, amounting to a small upgrade to nominal growth. “Overall, this is not a bad combination for European banks’ earnings,” they said.
Morgan Stanley strategists, in a separate note, examined how the Middle East conflict is affecting financial markets. They wrote that more than 100 days into the conflict, rates volatility has tracked the 2022 experience following Russia’s invasion of Ukraine closely, despite very different starting levels of rates and inflation. “Revisiting the 2022 Russia-Ukraine comparison, we find that oil, inflation expectations, and rates volatility have followed a surprisingly similar path,” the strategists said. They added that macro data could regain market influence as geopolitical risks persist and that they see an increased risk of higher realized volatility ahead.
In Asia, analysts weighed in on several banking and conglomerate stocks. Maybank analyst Thilan Wickramasinghe said recent drops in shares of Singapore’s three largest banks — DBS Group, Oversea-Chinese Banking Corp. and United Overseas Bank — might be overdone. The declines came amid fears about slower growth in their wealth management business due to changes in Chinese outbound investment regulations. While there could be negative impact on near-term investment flows to Hong Kong, Wickramasinghe said, Asean makes up a larger part of the banks’ assets under management. Maybank maintains a positive rating on Singapore’s banking sector.
For Indonesian conglomerate Astra International, Maybank Sekuritas Indonesia analyst Paulina Margareta said the company’s headwinds — including lower automotive market share — are largely viewed as priced in. She retained a buy call, noting that management has unveiled a roadmap focused on delivering sustainable total shareholder returns by emphasizing portfolio discipline and capital allocation efficiency. However, she cut her 2026-2027 earnings forecasts for Astra by 11%-12% and lowered the stock’s target price to 5,500 rupiah from 6,700 rupiah. Shares were trading 1.3% higher at 4,760 rupiah.
Morgan Stanley analysts struck a bearish tone on Australia’s Westpac. While they acknowledged the lender’s contention that its brand appeal, customer advocacy and status as customers’ main financial institution have improved, the analysts kept an underweight rating. They told clients that Westpac hasn’t provided an update on its second-half performance nor issued new financial targets. With demand for property investment loans waning, the analysts cautioned that a material shift in operating conditions would increase the risk of earnings downgrades. Morgan Stanley set a target price of 31.50 Australian dollars on the stock, which was up 1.6% at A$35.035.
Malaysia’s stock market is likely to be driven by external risks in the second half of 2026, including tensions in the Middle East, supply-chain disruptions, inflation pressures and potential U.S. rate increases, said Imran Yassin Yusof, an analyst at MBSB Research. He recommended a defensive investment approach that emphasizes stable, lower-risk stocks while retaining selective exposure to growth opportunities. Should market risks ease, investors could gradually increase exposure to cyclical and growth-oriented stocks while maintaining a core holding of defensive names, he said in a note. MBSB’s preferred picks include Tenaga Nasional, CelcomDigi, CIMB Group and Inari Amertron.