Europe's Inverted Rally

Tyler Durden's picture

As European markets have rallied - just like in the US - forward earnings estimates have inched down, leading to a significant multiple (eurhopia) re-rating. As we noted last week, this multiple expansion is dramatically 'rich' compared to sovereign risk changes and is now at the top-end of the euro-zone crisis range. Meanwhile, sentiment has become palpably positive - put/call ratios near lows (highs in complacency; and at the same time European cash equity trading volumes have plunged to 12-year lows (with no high-priced AAPL to 'defend' this with); while fundamentally earnings momentum among cyclical stocks has continued to deteriorate since May 2012. But apart from that, it's all good...

 

The 'P' Has Risen, But The 'E' Has Fallen

 

And Sentiment has soared...

 

While volumes have plunged...

 

 

As meanwhile earnings momentum in European cyclicals have been deteriorating since May 2012 as the macro backdrop has accelerated lower...

 

Charts: UBS