The capital markets are "more sustainable" this year than at their peak in 1999 in spite of record levels of mergers and acquisitions and equity activity, according to Morgan Stanley.

Analysts at Morgan Stanley compared seven potential indicators of a market bubble with the same metrics from seven years ago. The report found this year's average bid premium of 11% was just one third that of 1999, while the proportion of hostile takeovers was 10 percentage points lower. In Europe, the price to earnings multiples of the equity market are nearly 70% lower, and stock markets are up only 14%, compared with 1999, when they rose 40%. In the debt market, leverage is 10 percentage points lower, but is predicted to fall a further eight points during the next 12 months. The report dismissed concerns of a developing bubble market. "M&A and capital markets activity is arguably more sustainable this time around," it said. M&A activity in Europe is running at its highest level as a proportion of market capitalisation since 1999. For the year until December 11, European deals were running at more than 10% of total market capitalisation, according to a research report by Credit Suisse. The peak seven years ago hit less than 15%. Last year, the figure was 7.1%. European equity issuance this year surpassed the record level of 2000, hitting $272bn (€206bn). However Morgan Stanley is predicting a 15% increase in issue volumes next year, estimating up to $315bn of equity sales.