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
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And Sentiment has soared...
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While volumes have plunged...
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As meanwhile earnings momentum in European cyclicals have been deteriorating since May 2012 as the macro backdrop has accelerated lower...
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Charts: UBS