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1. Nvidia came in with another earnings beat.

“There’s been a lot of talk about an AI bubble. From our vantage point, we see something very different,” Nvidia Chief Jensen Huang said.

The wizz kid himself was happy to share that AI is a profit center for the whole industry: data center providers, hyperscalers using those datacenters, and companies using those trained models. Nvidia pulled in $57B in revenue, with $51.2B coming from data centers, and a gross margin that climbed to 73.4%. Revenue climbed 62% from last year. The beat sent shockwaves through cold November markets.

Mag 7 names were higher, with Nvidia up 4% in the post-market, a gain of more than $300B.

Below: Nvidia bouncing on its 100 day moving average.

2. Interest rate forecasts are pointing to lower rates.

But the FED remains divided on what to do in December with interest rates.

“Rates are high, so is inflation, and we can’t agree on when to cut next. If data changes, we’ll for sure cut more.”

It’s not that FOMC members said they did not want to cut again, it’s that they are not in agreement of when to cut next.

3. The European market has not been immune to the current volatility episode.

However, confidence remains high that earnings will deliver, with double-digit growth expected next year, buoyed by fiscal stimulus and an economic recovery.

“Monetary/fiscal easing should lift US/EU GDP growth above trend, and help improve market breadth,” say Barclays strategists led by Emmanuel Cau.

They add that while the AI supercycle has legs, it’s no longer the only show in town. “Against this backdrop, we find EU equities well positioned to capture some reflationary tailwinds, given their cheaper valuation, lower crowding and easier earnings comps, without being overly dependent on the fate of the AI trade, although politics remain a risk.” “Breadth” (concentration risk) has also still been healthier than in the US, with a larger number of stocks driving the rally.

4. Europe’s small caps look ready for a change of fortune as fiscal stimulus starts to flow through the broader economy.

“Small versus large cap pricing now looks too pessimistic,” a BofA team of strategists write in a note. “There are a number of potential support factors for small versus large caps going forward.”

The bank’s economists see scope for a pick up in euro-area final private demand growth in the first quarter as the benefits from German investment start to show up. A further decline in bond yields accompanied by more euro strength should also support small caps.

This reporting season supports the case for a small-cap rally. Third-quarter earnings are tracking nearly 11% year-on-year growth for the Stoxx Europe 200 Small, handsomely exceeding the 6.6% increase achieved by the Stoxx Europe 200 Large.

5. European small caps are cheap.

Smaller stocks have historically traded at a premium to their bigger peers because of typically stronger earnings growth.

That’s been turned on its head lately, with small caps trading at a discount.

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