France

With the debt downgrade out of the way, is now the time to invest in French companies? French listed large caps trade on multiples that are only two-thirds of the biggest U.S. companies (PE of 12 in France versus 19 in the U.S. according to Bloomberg). This means they are cheap if you think the outlook will improve. Some investors obviously do since, in aggregate, demand to borrow French large caps is down 6% over the past quarter.

While average levels of short interest across all French equities remains low, demand to borrow is significantly higher amongst larger stocks, with media and technology focused companies bearing much of the brunt of negative investor sentiment, which has increased by a third since August. We use securities lending flows to highlight the stocks seeing the highest absolute levels of short interest as well as those seeing the fastest rate of growth.

Upbeat news from the recently formed International Airlines Group, which recently reported continued growth in passenger traffic and revenue, was over-shadowed by gloomy forecasts from the overall industry body. IATA reported that the positive measures being reported by the industry were based upon the optimistic outlook that marked the start of the year, but with business and consumer confidence back in decline, and high fuel prices and sluggish international trade, a weaker end to the year is expected.

The trade event of the year for the interactive entertainment industry, E3 Expo 2011, will draw in the crowds this week as the leading computer and video game companies reveal the future of interactive entertainment. There is even excitement towards Sony and the Play Station Network despite the recent hacking attack and rumors of more to come. There seems to have been a U-turn in the ways investors tend to predict the contrasting fortunes of gaming retailers versus game publishers in this booming industry.

Rail commuters in the UK are privy to the latest digital billboard advertising where content is tailored to match the locality – “Heading to Southend? Try Southchurch Park Café." The ads have been created by Yell, to showcase its local business information and reviews. Faced with the onslaught of competition from every direction, commentators have been predicting the demise of these directory based businesses for years, yet they persist and still turn a profit.

Following a week of positive earnings in Europe, the Stoxx 600 Europe reached the highest level since 2008, according to Bloomberg. This week continues with European companies reporting quarterly and full year earnings.

It is not surprising that tensions are surfacing between the telecoms and internet giants, and that we have been following this week’s conference in Paris (Le Web). Telco CEO’s have aired their views that the amount of data being used by the ever-advancing smart phones is very expensive for them and a cost that they would love to share with someone other than their subscribers.

The global media moguls congregated in Barcelona this week for the Morgan Stanley TMT conference. No doubt, there will be an upbeat atmosphere as the sector continues to show signs of growing recovery. The television broadcasting industry has been particularly bullish of late, with key players seeing share prices reach new annual highs but the outlook for 2011 remains uncertain.

European short and squeeze stocks highlighted this week covering Germany, France, Switzerland and the Netherlands.

LVMH’s (EPA:MC) stake in their luxury rival Hermes (EPA:RMS)has made serious headlines. I can see why certain commentators are drawing parallels with the infamous short squeeze that followed Porsche’s aborted takeover of Volkswagen, but we need to challenge their assumptions.