Market trading sideways since yesterday morning after we actually got better EU PMI data. The Dow had the smallest loss recorded on history, -0.003%.Markets are very over-heated, positioning is much higher than what it was a couple of months ago and there is now very little protection on portfolios.

The latest news on Trade-war seems to be a bit less friendly as it seems that the tariffs removal from US is the sticking point for the Chinese. Some sources are reporting of a signed deal delayed to December.With a lost of shorts covered, there is currently little room for a negative surprise from these levels.

In UK, things keep going wrong for Boris as Welsh Secretary Cairns resigned (a first ever for a cabinet minister during an election campaign).Also, several media are reporting about the evidence that Russian financing of Boris Johnson is greater than previously estimated and that Alexander Temerko was more heavily involved in the plot to oust Theresa May than previously documented.Things are getting unpredictable again ahead of the election, the market and Gbp seems incredibly resilient.The BOE will meet today and they might cut the predictions for growth and inflation.

Macro-wise, yesterday morning we got the European final October PMI Composite (best correlation to GDP) which has an upward revision to 50.6 (from 50.2) from better than expected numbers on the services side from Italy and some upward revision in Germany. This is still an outright low level but we do think this is a stabilization of Europe (which was also seen in Sentix and slow and steady beat on GDP).

The Fear/Greed indicator published by CNN has been a good short-term trading indicator of over-extension. While at the end of August was too low, now it’s at 89 an overheat area which is higher even than January 2018, October 2018 and May 2019. The result is shown on the chart underneath.

A similar message to the email sent yesterday is given by the options traders on the ISE exchange which bought 238 calls for every 100 puts, the most since December 2005! The last time they have bought >2 calls for every 1 put was in September 2018. It hasn’t happened too many times over the past decade.

Banks were quite strong yesterday (with good volumes) on some articles about the potential creation of a EU Banking Union.The latest proposal might carry more weight vs previous iterations also because of the European bank deposit “re-insurance” system. It is not an immediate game changer but the promotion of this concept is the key missing piece before we can see more (any) M&A amongst European Banks.Given German historical resistance to such a scheme and that this is coming from the Finance Minister, it is a positive news.The Eurogroup will meet today, let’s see if some more details will be leaked. The only issue is that it could be politically motivated (heading into SDP elections), implementation might be years away and aversion from a number of EU member states could be meaningful.

Interesting to note that on European banks we had 85% of beats so far on Q3 earnings. This is an important prerequisite for some stability going into 2020. Over 60% of banks have beaten PBT expectations, clearing the revised bar. Misses were concentrated in Scandinavia and the UK, while 85% of Eurozone banks beat the street’s PBT numbers, on average by ~3%. Valuation may have bottomed following a wave of negative revisions and with lower political risk and stabilization in depo rate expectations we could potentially see a gradual re-rating in the sector.

Stock Specific


CVS, another healthcare company beating consensus and raising 2019 profit guidance mainly due to strong results across its pharmacy services, health insurance and drugstore segments. Sees adjusted earnings $6.97 to $7.05 a share, up from $6.89 to $7.00. Stock up 5% yesterday, +8% YTD performance.

Barrick Gold, up mid-single digits, strong beat on revenues +40% YoY and dividend increased for the third quarter, from $4c to $5c. The CEO says that gold industry is short assets of gold production, then still needs more consolidation. Further, says the risk to the gold price is more on the upside than the downside. 27% YTD performance.

Kirkland, up mid-single digits, after delivering the strongest record earnings, +300% YoY and +69% QoQ. Significant growth in EBITDA +148% YoY and +60% QoQ, Q3 Revenues up +71% YoY and +36% QoQ, record free cash flow and operating cash flow jumping +145% YoY. +80% YTD performance.

Baidu, beat, post market up 6%, with revenues +2% vs consensus, and +63% adjusted net profit. Baidu’s Netflix-style iQiyi, which competes with Alibaba and Tencent, also reported revenue ahead of expectations. Company’s midpoint guidance is 2% ahead of consensus.

Siemens, indicated +2%, delivered decent Q4 results, with EBITDA +12% vs consensus, FCF strong and revenues +7% vs estimates. It expects a decline in market volume for some businesses next year amid a manufacturing downturn, especially in the Automotive division.

Arcellor Mittal, indicated +2%, financials look strong, commentary regarding progressive increase in base dividend should be taken well. However, more negative view on global steel demand may temper enthusiasm, especially after recent run.

Unicredit, indicated +3%, with revenues +3% ahead of consensus, capital ratio CET1 12.6% vs 12.4% consensus. Asset quality continues to improve as gross Non performing exposure ratio drops 130bps.


CNHI, weak results missing consensus on revenues and operating profit, stock down 4% on announcement. To highlight, 6% miss at EBIT level, take revenues guidance down but maintained EPS guidance, to be between $0.84 and $0.88, straddling the $0.85 consensus. +27% YTD performance.

New Gold, down 9.5% yesterday after the company said it expects Rainy River mine’s production to be on the lower end of 250,000 to 275,000 gold equivalent ounces for this year. Overall weak results, miss on earnings ($4c loss vs $2c consensus) but but operating cash flow beat estimates. 26% YTD performance.

Solvay, profit warning, cutting forecast for FY EBITDA to -2-3% from flat to moderately down before.

Commerzbank, profit warning, indicated -2%, cutting net income for the full year probably lower compared with 2018, down from an earlier target of a slight increase amid a negative interest rate environment.