Saturday 20 July 2013

Guest post - Weakening Global Earnings Momemtum - Rcube Global Macro Research

"The myth of unlimited production brings war in its train as inevitably as clouds announce a storm." - Albert Camus

Courtesy of our friends at Rcube Global Macro Research, please find enclosed their latest publication, where Cyril Castelli and St├ęphane Alloiteau look at the weakening momentum in global earnings:

Global earnings momentum is weakening.

Earnings revision ratios are moving lower almost everywhere except Japan.

In Asia, where we follow ERRs particularly closely (Asia being the workshop of the world, ERRs tend to be a reliable leading indicator), analysts have recently been lowering their estimates. The Chinese growth scare explains most of it.

AUDCHF weakness sends a similar message.

Asian earnings momentum weakness suggests that US treasuries yields have gone too far as we have recently warned.

In Emerging markets more generally, ERR have also substantially weakened:

In Europe the situation is also worrying, particularly so in France.

The recent upward move in the European composite PMI therefore looks unsustainable:

The only sign of strength is in Japan, where Earnings momentum remains close to historical highs.

World ERR is moving down, highlighting the potential risks to global growth.

"It is better to have your head in the clouds, and know where you are... than to breathe the clearer atmosphere below them, and think that you are in paradise."
- Henry David Thoreau 

Stay tuned!


  1. Interesting - do you know what the exact definition of ERR is and how they compile that information?

  2. Hi Michael, my friends at Rcube use the following:
    FY1 (up-down)/(up+down)

    Hope it helps.




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