Morgan Stanley says UK could face fiscal crisis, dollar could rally, Pharma could surge in 2010
Morgan Stanley says the UK could become the first of the G10 countries to have a major fiscal crisis if next year’s election results in a hung parliament. This is one of three potential “surprises” that are more likely than the market is pricing in, Morgan Stanley & Co. International says in a Strategy Euroletter for 2010. The other two are are that the dollar rebounds, leading to developed countries equities outperforming emerging markets; and Pharma is a large outperformer as it cuts costs and benefits from emerging markets exposure and corporate actions.
Overall, Morgan Stanley expects the current rally to continue in the near term, but that the MCSI Europe index will end 2010 at 1030, down 5% from today as stimulus is withdrawn and policy tightens.
The firm is bullish on Energy, Materials, Staples and Healthcare, but bearish on Utilities, Financials, Consumer Discretionary and Tech.
Stocks Morgan Stanley likes include Total (FP) , Wood Group, (WG), Xstrata (XTA), Syngenta (SYNN), Diageo (DGE) , Adidas (ADS), Roche (RO), Cobham (COB), SES (SES) and A2A.
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