Market Outlook
The Markets - A Review

Market Outlook

The Markets - A Review


• Markit's PMI for the euro area's manufacturers rose to a record high in December. Operating conditions continue to improve in all of the eight countries for which separate data is gathered, including Greece (where the manufacturing PMI is at a 114-month high). Once again, the survey highlighted strong growth in output, jobs and new orders.

• In early December, Eurostat published estimates of gross domestic product (GDP) growth for 3Q17. Relative to 3Q16, growth is estimated at 2.6%.1

• The European Central Bank (ECB) meeting in December ended as expected, with upward revisions to both growth and inflation. Ten-year Bund yields underperformed both treasuries and U.K. gilt, finishing the month five basis points (bps) higher.2

• Oil prices continued to rally, making December the fourth consecutive month of price increases. The Brent ended 2017 18% higher.3

• On the political front, the three pro-Catalan independence parties won a majority of parliamentary seats, but they fell short of a parliament majority. The Italian government has announced that the next election will take place on March 4. The new electoral system is proportional for the most part. The polls say that no single or party coalition is projected to win, and it will likely need support to form a grand coalition to rule the country. In the meanwhile, the Italian economy picked up speed and our economists revised GDP growth numbers upward for 2018.4

Head of European Equity Team

1 Eurostat.

2 Morgan Stanley Research, January 2018.

3 MSIM, January 2018.

4 Morgan Stanley Research, December 2017.

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