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Positive outlooks in a falling market

The market is not in the mood for positive outlooks today – with the FTSE 100 down another 2%.

But Citigroup nevertheless put out a relatively upbeat assessment of where UK stocks could be heading this morning.

Current lead indicators and macro data point to an easing of growth and an increased risk of recession. Our economists still expect global recession to be avoided but lead indicators point to c5% EPS growth in 2012. UK equities trade on below-average multiples on nearly all measures. Much in the price already for the risk of global recession and high margins. We maintain our year target of 6200 for the FTSE100. With AAA downgrades, Eurozone problems and markets wanting more action than politicians and policy makers have so far delivered, volatility is likely to continue. As earnings growth comes under pressure we expect, quality, growth and de-equitisation as themes to outperform. We view EM exposure and resilient dividends as key themes as well.

Morgan Stanley’s suggestion that the global economy is “dangerously close to recession” has got more headlines this morning, but those taking a positive view will note what else the bank said:

Recession not our base case: Our revised forecasts show the US and the euro area hovering dangerously close to recession – defined as 2 consecutive quarters of contraction – over the next 6-12 months. Still, recession is not our base case because: the corporate sector looks healthy; household real incomes will be supported by lower headline inflation; and we expect more action from the Fed and the ECB, including rate cuts and more non-standard easing.

The reasons for today’s fall seem a bit mysterious, with little in the way of news on slowing growth. The sell-off does look like it is based on growth fears – oil is down, and the miners, the big global growth investments, are all down too. Gold, perhaps needless to say, is up further, above ,800 an ounce, hitting ,810 at one stage. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds