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SOLID PERFORMANCE BUT RED FLAGS (1612 GMT)
A lot of the usual stuff this week: Loads of headlines about the trade war have driven main European bourses as the market sentiment dance to the tune of news surrounding US-China trade deal.
Even if investors optimism was cut back when Trump decided to side with Hong Kong democracy protesters later this week, bourses have moved higher this week, extending gains on what has been quite a good year so far.
Performance remains solid but there are some red flags to watch out for, strategists at Unicredit say.
Equity inflows have mostly involved ETFs, which comes with the risk of possible selling off if markets turn. Additionally, equity indexes look overbought in the U.S. and Europe.
"Record short volatility positioning and large inflows into ETFs have dented confidence in a long-lasting rally in equities," says Elia Lattuga, deputy head of strategy research at the Italian bank.
QE BINGE, QE HANGOVER (1551 GMT)
Little reminder by BNP Paribas' chief economist that too much of a good thing can cause a hangover. It applies to booze, sure, but it also applies to extremely accommodative monetary policies.
Reading into the latest ECB’s Financial Stability Review, William De Vijlder sees a few possible nasty side effects in a QE-negative interest rate binge.
"Quantitative easing, by modifying the risk structure of investment portfolios (less government bonds and more exposure to assets with a higher risk), will probably increase the sensitivity of portfolio returns to the business cycle", he writes.
Why should you care?
Well, "in case of a severe growth slowdown, this implies increased downside risk, which investors may seek to preempt by reducing positions in risky assets, thereby accelerating their decline".
Food for thought when the cycle turns.
Here's the link to his piece:
"SO MUCH OWED BY SO MANY TO SO FEW" (1504 GMT)
Interesting point by Makor's Stephane Barbier de la Serre: with growing evidence that it's actually extra loose monetary policy which is keeping the bulls running rather than anything else, it feels the extraordinary influence that a handful of central bankers have had over financial markets during this decade is sometimes overlooked.
That made the strategist think that the famous tribute of Winston Churchill to RAF pilots during the 1940 Battle of Britain - "Never in the field of human conflict was so much owed by so many to so few" - could also be used to stress the role played by the Draghis and Yellens of the world.
Makor argues that the reason why the longest bull market in history shows no sign of dying of old age is that "central banks are signing free checks to endorse speculation on risk assets in general and global equities in particular".
Other explanations such as macro bottoming up or trade war sentiment are "pure...." - excuse his French.
CANNABIS: TIME FOR EUROPE TO EXHALE THE FOMO? (1326 GMT)
The 2018/2019 "pot stocks" frenzy which took Toronto and New York stock exchanges by storm left many European fuming with FOMO (fear of missing out).
While in October 2018, investor darlings such as Aurora Cannabis or Canopy Growth were hitting record highs and worth tens of billions dollar in market caps, European bourses had almost nothing to offer to satisfy a pot stock craving.
Quite frustrating for an investor walking through a typical UK high street full of offers for CBD products, a derivative of cannabis reputed to ease anxiety without the high associated with marijuana.
Looking down the dark alleys of the same UK high street, the investor would also be reminded that Europeans spent at least 11.6 billion euros in 2017 on illegal cannabis purchases and that by contrast, marijuana shops in California, the world's largest legal market for cannabis, had revenues worth around $2.5 billion last year.
Anyhow, now that much of the "green rush" went up in smoke and ended being a 'bad trip' for many investors, it's probably time for European investors to exhale the FOMO and have another look at what the industry has to offer stock investors.
You can see below how the market cap of the ten biggest components of the alternative Harvest ETF (an industry benchmark) plummeted since March:
First of all, now could be a time - not the faint of hearts - to have a look at the valuation of the 100+ pot stocks available on the other side of the pond.
Given that there is so little coverage, investors got to do much of the homework on their own but there could be some opportunities out there.
"Some of them are dirt cheap", Nikolaas Faes, one of the very rare analysts covering Cannabis stocks in Europe, told us yesterday on the sidelines of an industry conference in London.
Stockpicking in the industry is a risky business he cautions, pointing out that sales forecasts are much too high at the moment and will most likely be revised down.
With fears of overproduction and falling prices weighing down on stocks, the narrative is switching to companies which can avoid "commoditization" and be to weed what champagne is to grapes.
For those investors who would rather place a bet on the industry, trading platforms in Europe offer products which track the biggest Canadian and U.S. stocks, such as the London Capital Group's LCG Cannabis index.
But the past pot stock FOMO was only felt by retail or institutional investors, it was also a corporate finance thing.
Faes' employer, Bryan Garnier, organised the Cannabis conference mentioned above, as it seeks, along with competitors such as Canaccord Genuity or Bank of Montreal, to become a key player in the fast-growing industry and win mandates to advise on merger and acquisitions or rights issues.
Speaking of which, Faes told us that 2020 might very well be the year when Europe finally gets a proper (understand at least tens of millions of euros) Cannabis company listed.
Looking at the deal flow generated by the industry, fighting for a top seat at the table is a strategy that makes sense as the European financing of the industry is such at an early stage.
Antonin Cohen, founder and CEO of Harmony, a Barcelona-based company specialised in CBD products, told us on the margins of the Cannabis conference that 70% of the capital from his last fund raising came from the U.S.
"European capital is not yet available", he said.
Courtesy of Refinitiv, you can see below how big M&A has become in the Cannabis industry and how it is dominated by North America:
A bit of reading:
Wave of European Cannabis firms to list in 2020, analyst says
Cannabis sales in EU raise $13 billion for crime gangs
BUZZ-Pot stocks high as U.S. House panel passes Bill to federally legalize marijuana
(Julien Ponthus and Ritvik Carvalho)
NOVEMBER 2019: A RORO KINDA MONTH (1010 GMT)
It's been a RORO (risk on/risk off) kinda month. The STOXX 600 was up during 11 sessions and down for 10 and moved almost exclusively on U.S.-China trade war news.
Actually, there's been such a flurry of trade war headlines that there's probably a case of coming up with new handy acronyms like TWOLS (Trade War Optimism Lift Shares) or TJWOS (Trade Jitters Weigh On Stocks).
Overall, November hasn't been particularly spectacular with a rise of about 3%. As you can seen below, January, February, April, June and September came up with superior gains:
In terms of sectors, it was a very bad month for defensives with utilities and telecoms set to be the only ones to finish the month in negative territory. (left is utilities, right telecoms).
The main winners are logically at the other end of the spectrum with Tech, Industrials, Basic Ressources scoring 5% or so wins.
One index stands out and that's the FTSE 250 which rose about 5% as investors rush back on British domestic shares.
Very simply, there's hope a Tory victory on Dec 12 will boost an asset class that many investors snubbed since the Brexit referendum.
We used that chart a few times on the blog but in case you didn't see it before, here's how the FTSE 250 seem to track the probability of Boris Johnson and the Conservative party winning the general election:
November 2019 was also a horrible month for bitcoin, actually the worst in a year with a 17% fall.
In a nutshell, investors got drawn in October when Beijing made positive comments on blockchain technology but got hit this week when the country's central bank launched a fresh crackdown on cryptocurrencies. Read about it here:
Finally, November 2019 gave us this tweet from the president of the United States:
OPENING SNAPSHOT: BLACK FRIDAY INDEED (0821 GMT)
Talking about Black Friday, there are many theories behind why it is called so. One is that the day after Thanksgiving is seen as the point in the year when retailers go from being "in the red" to being "in the black".
The reason why we picked that theory is Ocado's 12% jump this morning. The British online grocer is in a different league, rising 13%, while the rest of the market is drowning in a sea of red.
Ocado is boosted by it's tech partnership agreement with Japan's biggest supermarket operator Aeon Co and a gateway to Asia, one of the fastest growing markets for e-commerce.
There are no other notable moves in Europe, but the pan-European STOXX 600 is down 0.5% in broad sell-off in almost all the sectors.
Trade sensitive sectors autos and mining are top fallers.
TRADE WOES KEEP STOCKS UNDER PRESSURE; OCADO SHINES (0748 GMT)
European stocks are seen falling 0.3% as the latest clash between Washington and Beijing over Hong Kong casts pall over trade truce between the world's top two economies.
In the corporate world, Ocado is called up 5% by traders after the British online grocer signed an agreement with Japan's Aeon Co to help the supermarket operator expand in e-commerce.
AIM-listed vehicle rental services firm Redde is seen rising 25% after rival Northgate in an all-share deal.
Shares of Norwegian bank DNB could be under pressure on news that police are probing if any laws were broken in its handling of payments from an Icelandic fisheries firm to Namibia. The investigation follows a report that Icelandic fisheries group Samherji had made illicit payments worth millions of dollars to secure fishing quotas in Namibia.
Japan's Aeon turns to Ocado to expand online grocery service
France's PSA to sell stake in smaller Chinese tie-up as sales slide
Hedge funds control 35-45% of Osram shares in headache for suitor AMS -source
Northgate to take over Redde, plans new vehicle renting firm
MARKETS IN WAIT-AND-SEE MODE (0638 GMT)
European stocks are heading for another subdued session with moves that are unlikely to hurt the chances of a monthly and weekly gain for the pan-European STOXX 600 index.
Financial spreadbetters IG expect London's FTSE to open 21 points lower at 7,396, Frankfurt's DAX to open 29 points lower at 13,216 and Paris' CAC to open 8 points lower at 5,905.
U.S.-China trade truce hopes and a Conservative majority in UK election with econominc conditions just about stabilising have driven stocks higher this month. STOXX 600 has risen 3.1% so far this month.
But in the last two days, investors have been in wait-and-see mode with Washington's Hong Kong bill injecting fresh uncertainty in the sigining of 'phase one' trade deal with China.
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)