Euro markets remain cheap despite prosperous returns

European markets have prospered over the last few years. Although they are marginally below the heady days of 2000, the MSCI Europe (Ex UK) Index has risen almost 150% since its nadir in March 2003 - a healthy return by any standards. So are European markets expensive again? Curiously, this market rally has been entirely under-pinned by earnings growth. Markets are not more expensive in PE terms - indeed, at 13.1x next year's earnings, they are trading below their recent average. As Morgan Stanley pointed out, typically 50% of a bull market's returns come from an upwards re-rating of mark...