European hedge funds are increasing their allocations to defensive stocks, while selling cyclicals in October, according to a report by Reuters that cites data from a recent Goldman Sachs trade flow report.

According to data quoted in the report, consumer staples, healthcare and utilities are part of the defensive stocks group, while cyclicals incorporate energy, materials, industrials, financials and real estate.

Quoting Goldman Sachs trade flow, the report said “from the start of October, we have observed a sharp rotation from cyclicals into defensives, arguably as a reaction to the macroeconomic/geopolitical environment.”

European hedge funds' allocation to cyclicals has declined to below 2% from 7% and defensive stocks now account for almost 7% of their market value versus 6% earlier, the report noted.