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1204 GMT – Energy company stocks have some catching up to do with the rebound in oil prices, says Morgan Stanley as it upgrades the sector to over-weight from equal-weight. Shares in the likes of BP PLC, Royal Dutch Shell PLC and Repsol SA have lagged a rise in the price of a barrel of Brent crude to a two-year high of $58, the brokerage says. Stock valuations in the sector remain depressed and among the cheapest in Europe and would likely benefit from any revival in bond yields, it adds. “Bond markets have appeared too pessimistic on inflation and we see scope for a further rise in yields as USD weakness and higher commodity prices feed into higher U.S. inflation,” Morgan Stanley says. (philip.waller@wsj.com)

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