Welcome to Thoughts on the market. I'm Andrew Sheets, Chief Cross Asset

Strategist for Morgan Stanley. And I'm Graham Seca, head of the European

and UK Equity Strategy team. And today on the podcast, we'll be discussing the 2021 outlook for equity markets across Europe

and how investors can view the region amid a global recovery.

It's Friday, January 8th at 3 p.m. in London. So Graham, before getting to

what's in store for this year, we should mention 2020. Well many stock markets

rose, European stocks fell by double digits. A reason that I think sentiment

towards Europe is still so skeptical. What do you think happened?

Yeah, Andrew. So I have to put the blame at the door of COVID I think. COVID hit Europe harder than elsewhere.

Not necessarily, I'm not talking about terms of the number of infections per se, but rather in terms of the hit

to the economy and corporate profits of European companies.

You know, for example, if I look at the Euro area economy in terms of GDP,

it contracted by about 7% in 2020, That is more than double the fall that we saw in the US economy or the

global economy. And if actually if we look to the UK, the decline was even worse.

The UK economy looks like it had the biggest hit to GDP of any major economy in the world,

down around 11%. We think European earnings fell by around 30% or more last

year. That is approximately twice the decline that we saw in the US or Japan.

And actually in emerging markets, the earnings fall appears to be single digit only.

So when we view, you know, when viewed through this lens the

underperformance of Europe last year actually seems pretty logical. Okay, it

underperformed in line with weaker growth. And so then turning to the future what do you think this year

holds in store for Europe and how do you think the market gets there? Yeah so

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