Morgan Stanley has named a raft of "cheap" global stocks to buy, advising investors to stay disciplined on valuations amid rising market volatility. Global stock markets were slammed by a confluence of headwinds in the first quarter, such as surging energy prices and inflation, as well as geopolitical tensions. Some market watchers have argued that recent movements in U.S. Treasury yields suggest a recession is around the corner. "Despite a weak quarter for European equities, the region has rebounded strongly in recent weeks … the region now trades around pre-conflict levels," Morgan Stanley's strategists, led by Ross MacDonald, said in a research note on Apr. 7. The bank has a price target of 1,830 points on the MSCI Europe , representing a 4% potential upside to the index's closing price of around 1,753 on Apr. 8. The bank has also forecast earnings per share growth of 3% for the index this year, lower than the average analyst estimate of 9%. EPS is an important metric used by traders to gauge the value of a stock or index. "Risks around oil and gas availability mean that we are assigning a much higher probability of a European recession than usual," MacDonald added. Concerns over oil and gas supply disruptions have risen since the onset of the Russia-Ukraine conflict amid U.S sanctions and Moscow's threat to cut off supplies to Europe. But MacDonald believes the wider market — or any sector in the wider global market — has not priced in recession risks, meaning he believes that European stocks look increasingly cheap relative to their global peers. Meanwhile, as stagflation risks continue to rise, elevated inflation data warrants a higher level of valuation discipline for investors, given the fairly tight link between global central bank policy trends and stock valuations, according to Morgan Stanley. The Fed raised its benchmark interest rate for the first time since 2018 last month and signaled that there are hikes to come. Many analysts expect s even 25-basis point hikes by the end of the year. Read more Analysts love these 'cheap' global stocks they say are set to outperform Value investor David Katz says he'd 'aggressively' buy banks and thinks this tech giant is too cheap Stock picks Against this backdrop, Morgan Stanley said there is "no lack of opportunities" within the European space as it screened for regional stocks that are trading cheaply relative to their global peers. The bank's screen turned up a raft of stocks across several sectors. They include private equity firm 3i Group and Lloyds Bank in the U.K., France's BNP Paribas and Societe Generale , as well as Italy's UniCredit . Three energy firms — BP , Shell and Repsol — made the list too, as well as automakers Renault and Stellantis . Mining titans Glencore and Rio Tinto also made the bank's screen. Rounding off the list are Danish shipping giant Moller Maersk , steel producer ArcelorMittal and German chemicals firm Covestro .
Market volatility has been on the rise on the back of soaring inflation, geopolitical tensions and rising recession risks. But some Wall Street banks have a raft of stock picks to navigate this challenging backdrop.
Morgan Stanley has named a raft of "cheap" global stocks to buy, advising investors to stay disciplined on valuations amid rising market volatility.