The European equity markets have an opportunity to put an end to three consecutive weeks of decline. To do so, they will have to make good today on the rebound sketched out the day before. A revival that resulted in a 19% gain for the European tricard, the UK's Burberry. This unexpected craze followed a session of self-flagellation, during which the new management reeled off the strategic errors of the past, while swearing that it had the magic formula to restore the reputation of the brand known for its trench coats and checkered cashmere scarves. 

The US, meanwhile, continued to soak up its recent gains. Wall Street was dragged down by its industrial and healthcare stocks, while bets linked to Donald Trump's election needed a break. The automotive sector was particularly affected by rumors of Donald Trump's intention to abolish the 7,500 dollar federal subsidy for the purchase of an electric vehicle. Lucid lost -4.6% and Rivian -14%. Even his colleague Elon Musk's company, Tesla, took a hit, falling -6% (after having gained 42% in a month, it's true). The small-cap segment also took a beating, with the Russell 2000 falling sharply for the third time in a row yesterday. In addition to digesting recent gains, the US stock market took a beating after Fed boss Jerome Powell's tepid comments on the trajectory of key interest rates. He stressed both the strength of the US economy, which is currently unrivalled, and the lack of urgency for the Fed to cut rates quickly. Investors saw this as a more conservative stance than expected, which was immediately reflected in rate forecasts for the central bank's December 18 decision. The probability of a status quo has risen from 17.5% yesterday to 41.1% this morning. The main assumption is still a quarter-point rate cut, but it has been weakened. I would remind you that the equity markets welcome a fall in key rates, as it means cheaper, and therefore more plentiful, money. The bond market hardly reacted at all, having anticipated the situation at the start of the week.

Professionals generally believe that the Trump Trade's loss of steam is only temporary, and that FOMO - the fear of missing the bull run - will soon make a comeback. However, they are uncomfortable with the valuation levels reached by US equities. They're expensive, but discussions about valuation are becoming increasingly rare,” sums up SocGen's strategy team. The S&P500 is paying on average 22.5 times expected earnings in one year's time, well above the 5-year average (19.6 according to FactSet) or the 15-year average (16.4). This is a record year for the US broad index, which will outperform its European counterpart, the Stoxx Europe 600, by 20% in 2024, the first time this has happened since 1995, according to Bloomberg. This discrepancy has given rise to another. Our friends at AlphaValue estimate that the 550 European stocks in their hedging universe are paying on average 13.7 times next year's expected earnings. This means that US equities currently command a 64% premium over European equities. A little less if we exclude European sectors whose P/Es are in deep recession (oil, banking and automotive). But the gap is historic and reflects, in part, the idea that the old continent will be badly battered during the Republican term in the White House.

The day's macro news is dominated by some positive signals from the Chinese economy, with retail sales rising at the fastest pace in eight months, exceeding expectations. Investors are keeping an eye on the series of statistics expected from the United States in the afternoon, in order to confirm or refute their doubts about the rate trend. As things stand, any data that is more dynamic than expected is likely to reinforce speculation that the Fed will maintain the status quo in December.

In the Asia-Pacific region, green dominated with moderate gains of up to 0.7% in Australia. India continues to struggle, while China suffers. The MSCI China, which is coming off five sessions of declines, is hesitating between rising and falling during the session. European leading indicators are firmly in the red for this November clearing session, as it is already the 3rd Friday of the month.

Economic highlights:

In the US, the focus will be on the Empire Manufacturing index and retail sales, followed by capacity utilization and industrial production, and finally business inventories. The full calendar is here..

  • USD/EUR 0.9450
  • Gold : USD 2571
  • Brent : USD 72.20
  • 10-year US : 4,43%
  • Bitcoin : USD 89600

Corporate news:

  • Applied Materials loses 6% after its accounts.
  • Globant loses 6% after its accounts.
  • Berkshire Hathaway made new investments in Domino's Pizza and Pool Corp during Q3, while continuing to lighten Apple and Bank of America.
  • The FTC intends to launch an investigation into Microsoft's cloud, according to the FT.
  • Meta fined 798 million euros by the EU for abusing its dominant position in the classified ads market.
  • The US investigates Citigroup over alleged links with a sanctioned Russian official.
    Today's main earnings reports: Alibaba Group Holding Limited, Progressive Corporation...

Analyst recommendations:

  • Alexandria Real Estate Equities, Inc.: Deutsche Bank downgrades to hold from buy with a price target reduced from USD 135 to USD 112.
  • American Airlines Group Inc.: Goldman Sachs drops coverage and upgrades to neutral from dropped coverage with a target price of USD 15.
  • Applied Materials, Inc.: Fubon Securities downgrades to neutral from buy with a target price reduced from USD 240 to USD 200.
  • Comerica Incorporated: Wells Fargo upgrades to equalweight from underweight with a price target raised from USD 51 to USD 73.
  • Delta Air Lines, Inc.: Goldman Sachs upgrades to buy from dropped coverage with a target price of USD 83.
  • Enphase Energy, Inc.: Morgan Stanley downgrades to equalwt from equalwt with a price target reduced from USD 93 to USD 74.
  • Five Below, Inc.: Evercore ISI upgrades to outperform from in-line with a price target raised from USD 97 to USD 210.
  • Ge Vernova Inc.: Morgan Stanley maintains its overweight rating with a price target raised from USD 301 to USD 367.
  • Landstar System, Inc.: Raymond James downgrades to market perform from outperform.
  • Liberty Broadband Corporation: Deutsche Bank downgrades to hold from buy with a target price raised from USD 90 to USD 95.
  • Mastercard, Inc.: DZ Bank AG Research downgrades to hold from buy with a target price of USD 520.
  • Microsoft Corporation: First Shanghai Securities upgrades to buy from hold with a price target raised from USD 450 to USD 500.
  • Morgan Stanley: Wells Fargo upgrades to equalweight from underweight with a price target raised from USD 107 to USD 142.
  • Netflix, Inc.: First Shanghai Securities upgrades to hold from buy with a price target raised from USD 742 to USD 823.
  • Southwest Airlines Co.: Goldman Sachs drops coverage and downgrades to sell from dropped coverage with a target price of USD 28.
  • Sprouts Farmers Market, Inc.: Evercore ISI downgrades to in-line from outperform with a price target reduced from USD 150 to USD 68.
  • Sunrun Inc.: Morgan Stanley downgrades to overweight from overweight with a price target reduced from USD 35 to USD 27.
  • Tractor Supply Company: Evercore ISI upgrades to outperform from in-line with a price target reduced from USD 290 to USD 285.
  • Ugi Corporation: Mizuho Securities upgrades to outperform from neutral with a price target raised from USD 27 to USD 30.
  • United Airlines Holdings, Inc.: Goldman Sachs upgrades to buy from dropped coverage with a target price of USD 119.