European Equity Strategy: The Case for Broadening

Research evidence excerpt

European Equity Strategy: The Case for Broadening

Idea

May 28, 2026 04:00 AM GMT

Morgan Stanley & Co. International plc+MEuropean Equity Strategy | Europe Marina Zavolock

Equity Strategist

The Case for Broadening Marina.Zavolock@morganstanley.comRegiane Yamanari +44 20 7425-2318

Regiane.Yamanari@morganstanley.com +44 20 7677-4652

As the US and Iran edge closer to a possible MoU to reopen the Morgan Stanley India Company Private Limited+

SoH, we see scope for European equities performance breadth Karthik Nityanand

to continue to rise from lows, pushing the index beyond its StrategistKarthik.Nityanand@morganstanley.com +91 22 6995-1587

recent range. We explore sector and stock upside potential in Morgan Stanley & Co. International plc+

the event of a deal. Leoni Externest, CFA

Leoni.Externest@morganstanley.com +44 20 7425-2681

Key Takeaways Emily A Woods

Signs of a possible US-Iran MoU agreement are growing* though not yet fully Equity Strategist

Emily.Woods@morganstanley.com +44 20 7425-1597

clear. This has led EU equities to attempt to break out of their recent choppy

range. Exhibit 1 : What if the Strait reopens? From a

We would expect a continued EU equities recovery on any deal progress technical perspective, our analysis suggests

following material underperformance vs US, muted flows since the Iran this would be most positive for Airlines,

escalation & healthy earnings growth. Aerospace, Luxury, Construction, & Autos; On a

more sustained fundamental basis, we prefer We provide 3 screens to play an EU equities catch up trade + widening breadth: 1)

to play Banks, M&M, & Semis combining inverse oil correl, inverse bond yield correl, & earlier false start deal

moves. European100 Sectors: Combined score in broadening rally scenario

Technical overlay