Deep Dive: Colder winters will lead to price pressures

Europe has lagged behind US

Andrew Harmstone, head of global balanced risk control at Morgan Stanley Investment Management, dives into European equities

Despite being tipped by most sell-side strategists to outperform the US equity market in 2021, European equities have lagged their US peers.  We believe one reason for the weaker performance is the dramatic softening in Chinese growth. European equities have historically relied heavily on strong growth from China boosting demand for certain key industries, such as German auto manufacturers and French luxury goods makers.  As China is currently facing multiple headwinds to growth, we expect a stabilisation at lower growth levels, translating into slower-than-expected sales and earnings...