Pro Perspectives 2/10/20

February 10, 2020

As we entered last week, the PBOC had rolled out an arsenal of policy measures (including a quarter of a trillion dollar liquidity injection into the Chinese financial system).  And they did so with confidence that they could be the backstop for the Chinese economy and for global confidence, and therefore become a "put" against downside risks in global financial market.   

So far, mission accomplished.  The S&P 500 futures, the proxy of global investor confidence, is near record highs again, up 3.7% from the lows of last week. 

And with a quarter of a trillion dollars of Chinese money undoubtedly being put to work in global markets, let's take a look at some opportunities in European stocks. 

Like U.S. stocks, German stocks are on (or near) record highs.  But there are very compelling laggards in Europe.  Italian stocks are well off of record highs, still 44% off of the pre-global financial crisis highs.  And you see in the chart below, the FTSE MIB traded today to the highest level since October of 2008.  

Next, here's a look at Spanish stocks.  It looks like a big breakout may be underway here too, with a break and three closes above this big trendline.  This line comes in from the 2007 highs.  Spanish stocks remain 38% off of those highs.