Volatile Estimates in Europe by Jennifer Thomson, Gavekal Capital

Changes in sales and earnings estimates have historically ranked fairly high in our factor analysis– a methodology we employ to gauge which variables have the greatest influence on/ correlation with moves in the overall market.

Volatile Estimates in Europe

Generally speaking, both variables have improved (albeit marginally) since March:

Volatile Estimates in Europe

MSCI The World Index

Volatile Estimates

Most of this improvement is the result of the more positive growth outlook for North American companies– and the dramatic turnaround in earnings estimates, in particular:

Volatile Estimates

MSCI North America

Volatile Estimates

Estimates for MSCI Pacific constituents have steadily improved as well– just not as sharply as those for their North American counterparts:

Volatile Estimates

MSCI Pacific

Volatile Estimates

In Europe, however, the trend toward a more positive outlook seems to have stalled and reversed as the change in both sales and earnings growth estimates has turned negative once again:

Volatile Estimates

MSCI Europe

Volatile Estimates

The recent moderation– following such a sharp improvement in estimates (on a three month basis)– suggests that MSCI Europe’s correction could continue quite a bit further:

Volatile Estimates