HSBC on Tuesday ​upgraded its ⁠stance on U.S. equities to "overweight" from "neutral, as earnings momentum and easing ‌geopolitical risks turned the narrative back towards fundamentals.

The British brokerage, however, downgraded ​Europe ex-UK to "neutral", saying "European activity looks much weaker and is more at risk ​from higher ​energy prices."

Earlier this month, some Wall Street brokerages, including Citigroup and BlackRock Investment Institute, which upgraded U.S. equities, have ⁠struck a similar note, favoring U.S. stocks over their global peers.

HSBC noted that nearly 30% of U.S. companies, so far, have reported earnings in the first quarter, 84% of which have beaten Wall ​Street's ‌expectations by an ⁠average of ⁠12%, above the five-year average.

"Buybacks are adding a steady, but important, tailwind. Announced S&P ​500 buybacks total $430 billion year-to-date, up 20% ‌year-on-year. Seasonality also helps, with Q2 ⁠typically strong," the brokerage added.

HSBC also cautioned that "there are a few areas worth watching closely: first, oil and energy prices; second, the potential for sector rotation if energy prices remain elevated for an extended period. A durable ceasefire between the US and Iran would likely ease prices, especially if traffic through the Strait of Hormuz returns to normal."

Looking ahead, HSBC said it continues ‌to prefer sectors with lower commodity input cost exposure, ⁠including banks, insurance, and technology.

At the sector ​level, HSBC upgrades global Basic Materials to "overweight", reflecting strong earnings revisions and the view that commodities should remain supported by a ​broader commodity "squeeze," ‌while downgrading both global health care and industrials sectors ⁠to "neutral". (Reporting by Joel Jose ​and Akriti Shah in Bengaluru; Editing by Shailesh Kuber)