In a note entitled 'Don't Panic, Sell Staples', Morgan Stanley's European team has perceived a "compelling opportunity" for investors to start selling defensives and rotate into oversold high beta or cyclical stocks.Figuring that the 'Great Rotation' of 2014 "hasn't occurred at the asset allocation level, but rather within the equity market itself" as momentum trades unwound and unloved stocks returned to the fore, the broker noted that equity market rotation has hurt sentiment and morphed into concerns of macro weakness. "With momentum trades unwinding and unloved stocks returning to the fore, the severe nature of the equity market rotation has put a large dent in investor confidence," the note said. "Initially investors were concerned that this rotation preceded a sharp correction in equity markets, but clients increasingly worry that this signals a major slowdown in economic activity."However the analysts believe the risks of a material slowdown are low, in their view. Global purchasing manager index figures are close to three-year highs, economic surprise indices are rebounding, US inflation has started to rise, inflation expectations are stable, the economic indicator of 'Dr Copper' is rising, and earnings revisions are improving globally. "None of these indicators are suggestive of an imminent big growth slowdown, in our view."As such, the analysts recommend investors start to sell defensives, pointing out that 72% of defensive stocks have outperformed over the last month - "a ratio that has only been higher three times in the last decade". "Given our view that we are not about to see a sharp slowdown, we believe a compelling opportunity has now emerged for investors to start selling defensives."Morgan Stanley has now increased its underweight in Consumer Staples, on valuation ground, from -2% to -4% and recommended investors look for opportunities in cyclical and higher beta stocks.The analysts are screening for high beta and cyclical stocks that look oversold at present levels, and have upgraded Industrials from underweight to equal-weight, buying Michael Page and within IT have switched out of SAP into Capgemini.Also remaining within their European model portfolio are overweights on banks, including Barclays; insurers, including Prudential. OH