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Is it time to buy everything? Goldman vs. Morgan Stanley

Is it time to buy the European stock market dip? Even the most high-profile investment banks are divided.

Morgan Stanley this week issued a "full house" buy alert on European stocks, but a senior executive at rival Goldman Sachs urged caution on Thursday.

Sheila Patel, the CEO of International Goldman Sachs Asset Management, is optimistic on the performance of some equities—but advised investors to remain selective.

"We're actually bullish on equities. I don't know that we'd send off the flares for a full-scale buy everything alert," Patel told CNBC.

"I think actually it's a time not to buy everything. It's a time to be quite selective and look for the companies whose valuations have been battered in the recent volatility, but who actually have promising prospects."

On the other hand, Morgan Stanley argued in a European equities report on Monday that its market timing indicators (MTIs) showed the first "full-house buy signal" since the credit crisis started hammering euro zone stocks.

"Our MTIs also support our base case view of strong double-digit upside over the next 12 months. As of the market close on Friday August 21 we had our first 'full house buy signal' on our market timing indicators since January 2009," said analysts led by Morgan Stanley's Graham Secker.

Europe was always likely to garner interest as a safe haven, after the panic around emerging markets sparked by concerns about the China economy.

"We've continued to see interest in Europe from clients, in part because interest in developed markets has been stronger than emerging markets in the last couple of months of extreme turmoil, but also because there are some signs of growth in Europe," Patel told CNBC.

She added that the possibility of the European Central Bank (ECB) extending its quantitative easing program beyond the putative deadline of 12 months' time could be another incentive to invest in the euro zone.

The ECB started bond purchases this March under its 1.1 trillion–euro ($1.2 trillion) program of bond purchases. Its meeting on Thursday will be followed by its regular news conference, at which no policy changes are expected to be announced.

"We do see the potential for QE to extend beyond September 2016 current deadline," Patel told CNBC.

"I don't know that we are putting a bet on for it being extended just yet. But I do think in general, as we look at the central banks, around the world, they are paying attention to the challenges that many economies are facing."

The U.S. Federal Reserve is another international bank in focus, with markets wondering when the hike to record low interest rates will come.

Patel's opinion was clear.

"We still think you'll see Fed action beyond the end of the year," she told CNBC.

—By CNBC's Katy Barnato. Follow her on Twitter @katybarnato.

Clarification: This story has been clarified to reflect that Sheila Patel is the CEO of Goldman Sachs Asset Management International.