by Chris Becker A hallmark of NATO, the European Union and US foreign policy in Europe has been about containing the economic and political behemoth of Germany whilst defending the Western half of the continent from external threats. In the post WW2 era this has worked, save for the creation of the Euro which effectively
Elliot Clarke at Westpac: In July, President Draghi held closely to the tone and narrative conveyed at the June meeting. Of note in the press conference were a number of key points on: the path for policy; the consequence for the Euro; and the need for fiscal authorities to aid the economy, the latter representing
Via the FT: Horst Seehofer, the German interior minister, has set Angela Merkel an ultimatum, saying he would resign unless the chancellor acceded to his demands for tougher controls on the German border. It was the latest development in a conflict that could threatens to shatter the alliance between Mr Seehofer’s Bavarian CSU party and
DXY ground higher last night as EUR fell: AUD managed a weak bounce against DMs: And EMs: The yuan free fall is rapidly assuming epic proportions: Gold is in trouble: WTI is on fire: Base metals are worrying. Copper is testing crucial support: EM stocks managed a very unconvincing bounce: Same with EM junk: Treasuries
And I’m not talking about soccer, via the FT: Italy’s new populist government demanded the EU rip up its system for dealing with migrants at a mini-summit in Brussels on Sunday that laid bare divisions in the bloc over migration policy and piled pressure on German chancellor Angela Merkel. Dubbed the “summit to save Merkel”,
Via FTAlphaville: Following a turbulent week a fortnight ago, markets have calmed and were further assuaged by new finance minister, Giovanni Tria, saying on Sunday that “we are not discussing any proposal to exit the euro. The government is determined to avoid the materialisation of market conditions that push us towards an exit in any way.” However
Oh yes, from Elliot Clarke at Westpac: The past week has, yet again, emphasised the fragile nature of European politics and the Continent’s growth narrative. While the jolt higher in Italian yields was dramatic, this is really only a sideshow to the real issue: the continued absence of governments capable of reform, and the difficulties
Markets! EUR soared last night: AUD too: EMs not so much: Gold ignored it all: Oil rebounded, helped by a US gulf hurricane: Base metals yawned: Big miners recovered some: EM stocks too: Junk held on: Treasuries got flogged: And bunds: Everyone loves Italian debt: And US stocks soared though Europe is unconvinced: What changed?
Via Damien Boey at Credit Suisse: Pandemonium in bond markets Overnight, Italian political deadlock caused: 1. US 10-year yields to fall by 15bps to 2.78%, and German 10-year yields to fall by 8.4bps to 0.26%. US yields are at their lowest since April this year, while German yields are at their lowest since mid-2017. 2. Italian spreads
Via Damien Boey at Credit Suisse: More chaos in Italian politics and bond markets Italy’s prime minister-designate Conte has given up on his mandate to form a populist coalition government after talks with President Mattarella collapsed. The likelihood is that fresh elections will need to be held later this year. In response to the news,
EUR sank Friday night and DXY hit new highs: Hilariously, the market remains spectacularly long EUR meaning much more selling pressure ahead: AUD was soft against the tearaway USD: But not as soft as EMs: AUD CFTC shorts pulled back a touch to -23k: Gold held on and may have found a friend in Italexit:
Via Damien Boey at Credit Suisse: Europe is slowing Recent European data have surprised materially to the downside. For example, German industrial production and retail sales likely shrunk by around 0.9-1% in 1Q, after growing very strongly in 2017. Also, sentiment indicators have fallen sharply off historically high levels. We are not surprised by these
Here’s the chart to lead us off: That’s what a tearaway currency will do to you. Now other components of European boomlet are on the turn, via Westpac: With the benefit of hindsight, we believe that 2017 will be seen as this cycle’s peak year for Euro Area growth. Against the 2.5% year-average outcome for
Via Westpac: ECB President Draghi and the Governing Council were both subtle and direct in March, both with respect to their own economy and evolving global conditions. Beginning first with the Euro Area, having repeatedly revised up their growth expectations, the Governing Council took their first official step towards tightening policy by dropping the reference
Last night DXY copped it: AUD was strong against all DMs, in part owing to the North Korean thaw: It was mixed against EMs: Gold jumped: Brent was stable: Base metals firmed: Big miners lifted: EM stocks too: And junk: Treasuries sold: And bunds: Stocks firmed: It’s all about Europe today and none of it
The polls are not kind to Italian support for the EURO: However, Scope Ratings is sanguine: An important concern of many market participants is the euro exit debate in Italy, pushed by the platforms of euro-sceptic groups like M5S and Lega. According to a Eurobarometer poll released in November, only 34% of Italians said they
The European Central Bank (ECB) released their latest policy outlook last night and it set a fire under the Euro as the language within had gotten decidely more bullish. From Bloomberg: In the account of its December meeting, the Governing Council said there was a “widely shared” view among officials that communication would need to
Via The Guardian: Exploratory talks to form Germany’s next coalition government were on the verge of collapse on Sunday night after the four parties involved missed their own deadline to resolve differences on migration and energy policy. Chancellor Angela Merkel has been trying to forge a coalition between her Christian Democratic Union (CDU), its Bavarian
Via Westpac’s today Elliot Clarke: The second estimate for Euro Area GDP confirmed a 0.6% gain for the September quarter. Following March’s 0.6% and June’s 0.7%, that leaves annual growth materially above-trend at 2.5%yr. However, what got the market’s attention was not this headline result, but rather the acceleration in growth in Germany. There, annual
Via Deutsche: Why is the referendum illegal? The Spanish Constitution states that Spain cannot be broken up. The Article 2 in the preliminary part of the Constitution states: ” The Constitution is based on the indissoluble unity of the Spanish Nation, the common and indivisible homeland of all Spaniards”. The Spanish Constitutional Court suspended the
It had better not because it is leaving Spain: Catalonia will move on Monday to declare independence from Spain after holding a banned referendum, pushing the European Union nation toward a rupture that threatens the foundations of its young democracy. Catalan President Carles Puigdemont said he favored mediation to find a way out of the
The German election has gone much as expected but is still shocking markets, via the BBC German Chancellor Angela Merkel has been re-elected for a fourth term while nationalists have made a historic breakthrough in federal elections, exit polls suggest. Support for her conservative CDU/CSU alliance has dwindled but the bloc will remain the largest
A few months ago, French president Emmanuel Macron launched a new policy platform to protect France’s lowest paid from foreign competition: Emmanuel Macron warned Europe must accept the UK was crashing out of the bloc because of worries about foreign workers undercutting wages. The intervention is a striking departure from EU rhetoric since Britain’s Brexit vote a year
Via Macquarie: The business cycle in the Eurozone We forecast growth in the Eurozone to be 2.1% YoY this year, the highest since 2001. Lagging the US recovery by 3-4 years, we expect Eurozone growth to remain above trend. As with the US, as the rate of employment growth fades, so will consumption and overall
by Chris Becker An interesting study on the motivations and causes behind the shock Brexit vote which suggests a lack of higher education. Not surprising given it was also lower education levels that were “crucial” to Trump winning the Presidency. Its much easier to appeal to emotion than logic, particularly when it comes to isolationism.
By Leith van Onselen For more than a decade, the Productivity Commission has debunked the common myth that immigration can overcome population ageing. For example: PC (2005): “Despite popular thinking to the contrary, immigration policy is also not a feasible countermeasure [to an ageing population]. It affects population numbers more than the age structure”. PC
There are really four key scenarios that can occur in this Sundays (Monday morning for us Aussie’s) French election and they could really shape the performance of markets like EUR/USD (and EUR crosses), France 40 cash and more indirect markets such as the ASX 200, FTSE 100 cash and gold. Firstly, it’s important to understand
The USD firmed last night: Commodity currencies were weak: Gold too: Brent was flogged: Base metals rebounded a bit: Big miners mostly didn’t: EM stocks were hit: High yield was OK: US bonds were flat: So were European spreads: And stocks faded: It’s bizarrely calm given what is suddenly at stake, via the FT: French
Don’t look now but European election polling is turning bullish for growth. First up, the Netherlands poll in six days is seeing a crash in support for Geert Wilders’ racism party (in grey): Mr Wilders could never win anyway given he could not form a coalition but with his vote down to 20% from a high
Via Citi: Following the Brexit result and surprise election of Donald Trump, could the French elect National Front leader Marine Le Pen – who is running on an explicitly anti-EU platform and has promised an In/out EU referendum – in the upcoming Presidential elections? Such an outcome is only eclipsed by the prospect of a
