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Monday, 18 March 2019 17:00

Goldman Sachs and Morgan Stanley turn bullish on Europe

Goldman Sachs and Morgan Stanley turn bullish on Europe

Europe’s economy hasn’t given investors much cheer over the past year, but some are saying there are positive surprises in store, Caspian Energy News (www.caspianenergy.net) reports with reference to Bloomberg.

For Goldman Sachs, an emerging trend of euro-area numbers coming in above expectations suggests the slowdown may have bottomed out. That verdict is shared by analysts at Morgan Stanley, who point to Europe’s dependence on the Chinese economy, which is showing signs of turnaround.

“There are tentative signs that the worst of the weakness is behind us,” Goldman Sachs economists wrote in a note.

The improvement is showing up in Citigroup’s economic surprise gauge, which is at a five-month high. The next test will be on Friday, when the flash Purchasing Managers Index for March will be released.

For the Goldman economists, euro-area growth is set to pick up to an annualized pace of 1.4 percent in the second half of the year, having recently stabilized at around 1 percent. While indicators may not point to stronger momentum yet, a boost is likely to come from easier fiscal policy, lower oil prices and stronger wage growth.

Many of the idiosyncratic issues seen in 2018 are starting to fade, including problems in the German auto industry, according to Graham Secker, Morgan Stanley’s chief European equity strategist.

Then there’s the improvement in new export orders in China’s composite PMI, which tends to lead the euro-area measure, according to Secker. That could be a boon to investors -- after a trough in euro-area PMI, European equities on average see a 9 percent gain in the following six months, he said.

More details: https://www.bloomberg.com/news/articles/2019-03-18/time-for-optimism-on-europe-goldman-and-morgan-stanley-think-so?srnd=premium-europe

Person in charge of the newsline: Olga Nagiyeva 

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