Morgan Stanley (NYSE: MS) upgraded the energy sector to “overweight” citing sector-specific and macroeconomic factors are now more supportive for energy than materials, which was cut to a “neutral” rating as part of its global equities strategy.
The brokerage said that oil price fundamentals are improving and should continue to improve during the second half of the year. Morgan Stanley said that it likes Total and BP in the oil and gas market because they are cheaper than their U.S. counterparts and are supported by favorable currency exchange rates.
Morgan Stanley also said that it likes some of the smaller large players in the United States including Hess Corp and Occidental Petroleum because it believes that they have greater leverage on pricing.
Morgan Stanley also said that value was hard to find in the material factors, citing fading earnings momentum in the mining and chemical industries and the China’s tightening economic policy as well as potential tax changes in Australia that could affect the country’s miners.
The firm took Newcrest Mining, Centennial Coal, and Weatherford off of its global equity strategy recommended list and added Saipem, Noble Energy and Occidental Petroleum.
