1. This week is all about Nvidia’s earnings.

Nvidia trades close to the lowest ratio of price to expected earnings in more than five years — basically in line with the S&P 500. That suggests two things. First, traders remain skeptical about the duration of the AI bonanza — they may accept the optimistic earnings forecasts for the next 12 months, but they don’t see them lasting. Second, the market may be punishing Nvidia for overreliance on a relatively small group of clients, many of which it helps finance.
The circularity of Nvidia’s relationships with its biggest customers is a clear source of risk. The company is at the center of a network of AI companies that buy from, and invest in, each other. That may be contributing to the Nvidia discount in the market.

Below: Nvidia routinely beats expectations.

2. Citigroup strategists highlight the long-term case for holding European equities in global portfolios.

German public investment ran well below the euro-area average and below estimated replacement needs for much of the past decade.
Given the chronic shortfall, the duration of catch-up spending is not a cyclical top-up but the repair of years of deferred maintenance and modernization.
Alongside the potential for a continued cyclical uplift, market support comes from fiscal stimulus and the region’s emerging role as an AI diversifier, they add.

Below: Fixed Investment for the US, Europe and Germany.

3. German manufacturing rose 9.3% year-on-year - suggesting underlying demand remains intact despite logistical constraints.

Markets have largely faded the German stimulus trade since Q1, and we think that is a mistake. The €500bn infrastructure fund is real, and the issue so far has
been timing and planning rather than commitment.
We are seeing an inflection in total domestic orders, indicating a broad-based demand recovery beyond just defence procurement.
The gap between political commitment and earnings delivery is long, but once it arrives, it is likely to persist for years.

4. We are buyers of the ETF MDAX.

We continue to think that German equities are attractive and favor a diversified approach that balances targeted allocations to structural growth opportunities with other sectors that stand to benefit from a broadening earnings cycle.
The MDAX (Mid-Cap-DAX) is a German stock index managed by Deutsche Börse that tracks the 50 mid-sized companies ranking immediately below the blue-chip DAX index in terms of market capitalization and order book volume. We think it offers a good exposure the the German manufacturing boom.

Below: The MDAX has been going sideways…

5. Luxury sector should emerge from difficult years.

Europe’s luxury giants are seeing signs of green shoots in the key Chinese market, leading to a pickup in earnings estimates for the sector.

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