We started the week on a positive note as we are seeing mostly green on our screens. The FTSE / IBEX are both back above 6000 and 7000 respectively and the SX5E is above its 50 & 200dma (although still in the past months range of 3054 to 3451, target is 3451 July high). Over the pond, big tech stocks will be again in spotlight after the S&P made a new all-time high and closing high on Friday. Apple trading higher premarket and getting very close to being as big as the Russell 2000 (AAPL $2.170T, RTY $2.22T). Elsewhere big week for Donald Trump as the Republican National Convention kicks off today. He plans to speak every night so get ready for a noisy week.  

Quite a disappointing day after macro data wasn’t the best. Eurozone PMIs were softer in August (vs the initial post-lockdown pace that we saw) and showed that some economies are moving back below the 50 expansionary benchmark. EZ Composite PMI was 51.6 (vs 54.9 in July) and Germany’s manufacturing was probably the highlight (seeing a further acceleration in activity with the second month of positive China demand commentary, 53 vs 51 previously). Moving to the UK, activity accelerated in August (Composite PMI 60.3 in August versus 57 in July) but worryingly, job losses continue to increase as the end of furlough draws closer. Also note that the employment trends are also deteriorating in the Eurozone.

I’m very much looking forward to the weekend already and I only came back from holiday yesterday. That sort of sums up the market feeling too by the look of things.

The FOMC minutes published last night were clearly not taken very well by investors and we are back in the red. The US slipped into the close, Asia down even harder and Europe currently following the trend. The SXXP and the SX5E both testing their 50dma level although the longer term supports remain more important for us. The SXXP range is 350-380 and it just traded 365.32 last so no real cause for alarm. Volumes overall still pretty lacklustre vs the last 20 days. We actually have decent flow in the pad so please call if you would like some colour.

I’ve been away for a week and a half and although I hate to say it, this has not been the most motivating return. Main themes haven’t really changed much and volumes are still very mid-summery (down ~35% vs the last 20 days). Europe remains in the ranges (yet still nice to see the SXXP up +1.3% from when I left). You will all have seen the S&P new all-time closing high overnight – this time it comes with a BUT!…. Encouraging as it is that it cleared February’s peak of 3386, not only were the Small and Mid Cap indices down on the day but the S&P Equal Weight index was down 48bps on the day and for the S&P 1500 it was a 75% down day (only 25% of stocks up on the day). All in all unconvincing and we can’t say yet that it is clearly bullish.

After wrestling with a poor open European equities have managed turn it around trade back close to flat on the day. A two-year closing high by the SHCOMP helped the cause, while Yuan closed at its strongest level since late January.

QUOTE OF THE DAY “This will devastate us. People don’t travel to Spain any more just for sun and beaches.” Antonio Gomez of the SpainTOP travel agency in Madrid, on the closure of nightclubs. KEY INDEX MOVES   Stoxx50 FTSE DAX FTSEMIB ▲ +0.3% ▲ +0.7% ▲ +0.4% ▼ -0.2% Basic Res. Tech Telecoms Trav. […]

Quel dommage!

European equities have taken a body shot from the British government overnight as they announced plans to impose quarantine restrictions on France and Holland early tomorrow morning. Travel & Leisure names have led the region lower, with all sectors trading in the red. Volumes are up almost 35% against yesterday, but before getting too concerned that’s compared to almost non-existent participation. In a wider context, European volumes are still down 15% vs their 20d AVAT, so not exactly a crowning achievement.  

Two steps forward, one step back certainly the feeling of the day.

Volumes are proving pretty diabolical across the board, as the Value rotation splutters. Indices in Europe are all trading lower, but to be honest it feels more like a pause for breath than anything else. The dollar has resumed its weakness, while investors, in the absence of much else to do, have added to the long gold trade.

Before the ‘A-ha’s’ and the ‘Told-you-so’s’ can get an word in, the US’ small sell-off into the close last night actually reinforces a lot of what we were saying yesterday. It was Tech that soured late into the session, with the Nasdaq down almost 2%, while Value was again the outperformer. We are not going to get too far ahead of ourselves though, because the stark reality is that US Value is still about 1% away from a one month-relative high. Plenty of room to go before we get into the realms of a full blown rotation.

I’ve just got back to the desk after a week off, and I must say things are looking a lot rosier than when I left. While away, my holiday reading, aside of course from some of our brilliant research notes, was Matt Ridley’s The Rational Optimist. It’s a great read, and I would strongly suggest to those in need  of a little hope in what has been a fairly bleak year. As I settle back down in front of the screens and write today’s missive, I must say there is actually quite a lot to be ‘rationally optimistic’ about, long may it last!