Morgan Stanley Warns European Stocks Cooling Down

European shares may be the consensus pick for strong gains in 2014, but Morgan Stanley has downgraded the region’s equities to Neutral, expecting them to run out of steam.

While the bank prefers developed markets’ stocks over their emerging market peers, it believes Europe’s risk-reward profile is the worst among its peers Japan and the U.S., both of which it rates at Overweight.

“Europe remains under the threat of prolonged stagnation as deflation and low growth are likely to become entrenched in the absence of vigorous action from European policy makers,” it said in a note, calling its concern “Japanification,” a reference to the long economic stagnation in Japan.

via CNBC

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