Bank of America reopens European momentum crash signal

Investing.com -- Bank of America's European Momentum Conviction Indicator has reopened its crash signal after 30 days, according to a report released by the bank.

The current episode appears more consistent with aftershock fragility than a high-probability multi-wave crash in 12-month price momentum. The signal has reopened close to the trough in 12-month price momentum and after most of the deterioration in the underlying inputs had already occurred.

Bank of America found only three comparable episodes of such reopenings following an initial momentum crash: March 1999, November 2000, and February 2021.

In July, 1-month revision ratios showed weakness. Sales revision ratios fell to 1.07 and earnings per share revision ratios declined to 0.98, moving back into net-downgrade territory. Dividend per share increased marginally to 1.50, while buybacks declined to 1.51.

Inventories strengthened to 2.13 and capital expenditure rose to 2.05. Net debt revisions declined to 1.23, while price target revisions reached 2.34.

Last week, Europe-focused equity funds recorded outflows of $2.28 billion. Active funds saw outflows of $0.95 billion and passive funds recorded outflows of $1.33 billion.

Europe Stoxx 600 index constituents recorded $3.05 billion of inflows, driven by passive inflows of $3.24 billion, compared with $0.19 billion of outflows from active funds.

In July, cheap value stocks outperformed expensive value stocks by 17%, marking the fifth-strongest monthly return on record and the strongest since January 2022. The outperformance was broad-based across 18 of 20 sectors and all eight countries.

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