Pass the inhaler would you?

After the market managed to catch its’ breathe a bit yesterday after an initial wobble, today feels a little more serious. We are still well up on the week, and volumes today are down 20% from yesterday, though seeing both Growth and Value down does suggest that investors are taking a bit of risk off the table. Tech is one of only two sectors trading in the green in Europe, and Banks are down with yields by over 3%, which is reminiscent of what we were seeing pre the vaccine news headlines. Attached is a piece I put together a couple of weeks ago on whether Tech should be seen as Defensive during this time of Covid, have a read. Keep an eye on gold here as well which has popped higher in the last 15mins or so.

So a bit of a pause for breathe today, with volumes running at half of what they were yesterday. While that is a fairly significant slowdown, we are still well above the 20d AVAT. Growth is managing to outperform Value for the first time this week, though after a small wobble early doors, Value is catching up intraday. That wobble came as the STVP got within a whisker of its June high early doors. We are getting close again to testing that level, and a break above we see the next resistance at 1,221.68.

Don’t be fooled by the relatively small movements across European indices today. The animal spirit is very much alive.

Before we get into the nitty gritty though we have a piece out from the HealthCare team on the Pfizer vaccine results.  In this short note, they provide their thoughts on the headline numbers as well on regulatory timelines, supply, implications for other vaccine programmes, as well as the unanswered questions. Definitely worth a look.

*PFIZER VACCINE PREVENTS 90% OF COVID INFECTIONS IN LARGE STUDY

Now that’s a headline to shake off the Monday blues!

After what has been a tough few weeks (even months!) wadding through the election quagmire, with little to no good news around a vaccine, today feels like a great unshackling for the market and investors alike. The SX5E is having its second best day in five years, with Value outstripping Growth by almost 450bps. There is a decent rotation out of the WFH winners and into the WFH losers, with the likes of HFG -12.8%, DIA -16% and OCDO -15%, all suffering as investors take profit. After markets earlier in the session were already trading better thanks to better clarity around the US election, this Pfizer news is what investors all over the world have been waiting for. It is a truly momentous day, and while we are not over the finish line yet, it does feel like the tide is beginning to turn on what has been a pretty brutal year.

The problem with treading water is that after a while it gets damn tiring.

Europe fought valiantly to keep its head above water for the most part of the morning session however ultimately succumbed to the macro riptide, and was pulled under. Another deluge of earnings read ultimately better this morning, spurring some initial reversion after yesterday’s sell-off, however with COVID infection rates across the region only going one way that reversion was short-lived.

Although today was a much more encouraging morning of results, everything else felt quite gloomy early doors. Eurostoxx 50 traded back below the September lows of 3097 for most of the morning and wasn’t too far from the June lows of 3054 (3102 last), but has since recovered marginally. In Germany, we were used to associating the DAX with the “winners” but things changed since yesterday. The index made a 3m closing low and it is trading right at its 200 dma today (for the first time in 3 months – wow).  Volumes not very encouraging either as they keep suggesting that conviction comes on the sell offs (up +30% vs 20d AVAT).  Across the pond, history tells us that  tomorrow is the best day of the entire year for the S&P 500 so not everything is negative.

Europe has pulled itself up off the canvas today, with indices in the region paring back around half of yesterday’s wobble. Even a body shot from Boris Johnson hasn’t been enough to thwart the intraday recovery, with his threat that the UK will begin preparing for an Australia-style agreement (read no-deal) proving only a glancing blow to Sterling. Since then we have seen action from the European side, with Von der Leyen sending a team to London to ‘intensify’ talks. Feels more like bluster from Johnson than a walk out hence the mild reaction, but still not helpful for companies trying to plan for the future.

It seems that enough is enough.

After days of bobbing and weaving around market fluctuations, the collective groan from investors was almost audible this morning. European indices gapped lower at the open, as the likelihood of a pre-election US stimulus breakthrough continues to fade, while closer to home further lockdowns in London and curfews in the bloc only soured sentiment further, as did underwhelming earnings from heavy hitters such as Roche. The sell off today has sparked investors into action with volumes flooding back, with indices for the most part well above 20d AVATs. The VIX is higher, as is its European counterpart the V2X, though the still remain within the 25-30 range. We would need to see an upward breakout to really feel that the panic button is being hit.

A duck swimming gracefully on a serene surface, though its’ legs are paddling furiously below is the image that springs to mind when looking at markets.

European indices today are generally flat, and volumes remain lacklustre versus their 20d AVATs. Despite this, it has felt busy again on the desk, as we are starting to see the animal spirits awaken from their summer slumber. Both average order sizes and natural liquidity inquiries have increased markedly this week, which are both promising indicators that volumes are returning. We also had a raft of model updates out from the teams in preparation for the impending earnings, and a downgrade in Hargreaves Lansdown back to sell to add to the mix. We’re (not trying to get ahead of myself, but finding it hard to contain my excitement) back baby!

With investors standing on the precipice of another earnings season, staring into the unknown, it’s hardy surprising markets have felt nervous today. After initial weakness, driven by disappointing UK labour market data, a pause in the J&J Covid vaccine trial and not helped by ambiguous Brexit headlines,  we did seen Europe stage somewhat of a recovery, driven primarily by reversion in growth names. Asia earlier had been marginally better primarily thanks to reports that Chinese imports in September rose from -2.1% YoY in August to +13.2% YoY in September. Unfortunately, as I write this things do feel like they are rolling over, with volumes picking up on this down turn. Telecoms have bucked the sour mood though, up again today. Our Spec Sales Mandeep Singh scopes out his tactical buy case for Deutsche Telecom. Sticking with the space, we’ve also put out a short note on Talk Talk, in which Nick Delfas argues that potential high amounts of cash burn would scare off any bidders. Mind your eye there.