Morgan Stanley: 4 Reasons To Get Bearish On European Stocks

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Morgan Stanley’s latest Global Monetary Analyst note is out.For four reasons, the firm is “downgrading” European equities, especially financials:

no.1 – Policy response not yet sufficient – We do not believe that the ongoing policy response is yet at a level where it can stabilise equity markets. QE from the ECB would be the key positive game changer for stocks in our opinion. 

no.2 – Economic growth deteriorating – Key economic indicators suggest that the Euro-zone economy is slowing with the prospect of additional austerity and bank deleveraging to come. We doubt the recent improvement in US newsflow is sustainable into 2012. 

no.3 – Corporate margins are falling – In addition to weak economic growth, corporate profits are coming under increasing pressure from deteriorating margins. 

no.4 – Market timing indicators now less constructive – We have seen a meaningful rise in our key market timing indicators and, although not particularly high, they are no longer in ‘buy’ territory.

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