Updated: 1 - HSBC downgrades global equity rating to "neutral" due to Middle East tensions and artificial intelligence risks

Full update, including background information and analyst commentary

Reuters, October 26 - HSBC on Monday downgraded its rating on global stock markets from "extremely overweight" to "neutral", citing renewed geopolitical tensions in the Middle East and concerns over potential AI regulations ahead of the US midterm elections.

"Since mid-March, we've maintained an 'extremely overweight' stance on equities and an 'extremely underweight' stance on sovereign bonds. Given the shifting market narrative, we can no longer maintain the same level of confidence," HSBC said in its research report.

• HSBC upgraded ratings on developed market sovereign bonds from "extremely underweight" to "overweight"

• HSBC stated sovereign bonds may benefit in two ways: first, if Democrats win, AI development may slow down; second, a midterm election deadlock may ease fiscal concerns

• "The market's bet on a 'blue wave' may be overly confident. But if this scenario materializes, concerns over AI regulation could deliver another short-term blow," the British brokerage said

• On equities, HSBC is more cautious on the eurozone due to concerns in France; meanwhile, because of bearish sentiment toward AI in the region, HSBC is also cautious on emerging markets

• Additionally, the brokerage downgraded its "overweight" rating on gold and upgraded its rating on crude oil to "overweight"

(For the convenience of non-native English speakers, Reuters has automated the translation of its report into several other languages. As automated translation may contain errors or lack the needed context, Reuters does not guarantee the accuracy of automated translation texts and provides them solely for reader convenience. Reuters assumes no responsibility for any loss or damage incurred from the use of automated translation functionality.)