Morgan Stanley: 4 Reasons To Get Bearish On European Stocks


Photo: Wikimedia Commons

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.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at