Morgan Stanley Strategists Join Herd of Bulls for Europe Stocks

(Bloomberg) -- Morgan Stanley strategists are the latest voice on Wall Street to join the ranks of European stock market bulls.

Estimates in the region and in Japan “look low, while valuations are undemanding,” the strategists led by Andrew Sheets wrote in a global cross-asset note. U.S. investors “should skew defensive,” they said.

The optimistic outlook echoes similar calls by Goldman Sachs Group Inc. strategists, who said earlier this week that European stocks are less sensitive to rising rates, and more attractively valued. Peers at Citigroup and Julius Baer concurred, hinting at better times for the region’s equities after years of underperformance versus the U.S.

Morgan Stanley recommends cyclical exposure in European stocks, and advises foreign-exchange hedging, amid expectations of a stronger dollar. The strategists are less upbeat on Chinese equities, advising not to buy the dip “yet,” with growth headwinds set to peak in the first quarter.

Not everyone shares the bullish outlook for European equities. In a note on Friday, Bank of America Corp. strategists led by Sebastian Raedler doubled down on their call for a sharp correction in the region, as “growth momentum is weakening,” and “central banks are turning hawkish.”

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