Morgan Stanley (MS) Cuts Global Growth Forecast

Morgan Stanley (NYSE:MS) has a bearish view on the Global economic outlook for 2012. “Our economics team in Europe now expects a recession in Europe while the U.S. economy is expected to continue growing below its trend,” said Morgan Stanley. Morgan also cut its 2012 growth estimate for Asia to 6.9% from 7.3%.

“Since we downgraded our regional growth outlook in August 2011, we have been constantly worried about the increasing downside risks to growth. In addition to further evidence of weakening domestic demand, the external environment in Europe has made us more concerned about the region’s growth outlook,” economists at Morgan Stanley said in a research note on Monday.

Most analysts agree it looks as though Europe will fall into a full-blown recession. “The European economy is already essentially in recession, I think the UK is following close behind,” Russell Jones, Global Head of Fixed Income Strategy at Westpac Institutional Bank told CNBC on Monday. According to Jones, he believes the hopeful data on the U.S. economy while good, will most likely not last. “It is quite possible, we could be back in an environment that looks awfully redolent of 2008, quite soon, and that’s very troubling,” he added.

The Economic Outlook just released by the Organization for Economic Co-operation and Development paints pretty much the same picture except that group forecasts the U.S. economy will continue a slow pace of growth while the rest of the world’s major economies will see a slowdown.

Emerging-markets stocks may rise 39% by the end of next year, spurred by a “soft landing” for China’s economy, earnings growth and cheap valuations, according to Morgan Stanley.

The MSCI Emerging Markets Index may jump to 1,355 by the end of 2012, from the 900-1,000 range it has been hovering at this month, said Jonathan Garner, Morgan Stanley’s chief emerging-markets and Asia strategist. The U.S. brokerage firm has joined UBS AG in favoring Chinese stocks for next year, bolstered by confidence that the government will loosen monetary policies to support Asia’s biggest economy. Morgan Stanley favors China and its consumer companies most among the Asian emerging markets.

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About Rachel Brook

Rachel Brook is an up and coming financial writer focusing on commodity price inflation and how the overall market reacts to the price swings. She also covers emerging markets in Africa and SE Asia.

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