Archives of “europe” tag

rss

Eurostoxx futures +0.7% in early European trading

  
Analysis, Global Indices
#  #  #  #  #  #

Some catch up play for Europe going into the open

  • German DAX futures +1.1%
  • UK FTSE futures +0.6%
  • Spanish IBEX futures +0.6%
After the more upbeat mood in US equities yesterday, European indices have some catching up to do following the Easter break since last Friday.
The early gains belie the more measured risk mood so far today though, with US futures pulling back slightly after yesterday’s stellar advance. S&P 500 futures and Dow futures are down 0.2% while Nasdaq futures are keeping flatter with Treasury yields a touch lower.
That is keeping the dollar steadier and major currencies little changed so far on the day.

German Minister of State for Europe Roth says there will be “no business as usual” between EU & China

  
  Analysis
#  #  #  #  #  #  #  #  #  #  #

Michael Roth, German Minister of State for Europe in an pinion article in German news magazine Der Spiegel

  • will be “no business as usual” between the European Union and China following the assertive political moves on Hong Kong
  • urged fellow EU nations not to “be afraid to lock horns” with Beijing.
    referred to China by its autocratic political structure, casting it as a systemic rival that has “unfortunately” challenged Europe’s “foundation of values”
Via South China Morning Post, link here for more (may be gated).
china Germany

The euro is off and running. Levels to watch

  
Analysis, Forex
#  #  #  #  #  #

EUR/USD up 92 pips today

The euro cracked 1.17 in Asia and has continued to run higher, hitting 1.1764 as New York arrived before pulling back to 1.1747 at the moment. Today’s durable goods orders report hasn’t been a factor.
The impetus for the seven-day run in the euro was a successful European recovery fund negotiation. At the same time, the US is struggling with COVID-19 and European economies are closer to normalcy with virus counts low (although some hotspots are appearing).
Overbought indicators are obviously flashing warning signs for the euro but there is still a lot to like. 1.17 isn’t particularly high and assets in Europe are still relatively cheap. Carry is dead almost everywhere so that’s not going to be a big drag.
I’ll keep it simple on the technicals and highlight the June and Sept 2018 highs at 1.1852 and 1.1815 as resistance. I like the euro against the US dollar but the risk-reward at the moment is mediocre.
EUR/USD up 92 pips today

Coronavirus situation across Europe; what is happening?

  
  Analysis
#  #  #  #  #  #  #  #

Some updates to the virus situation across Europe recently warning by Saxony state premier UK imposing a 14-days quarantine for travelers from Spain The country recorded a rise of 340 new cases today, a more modest figure but could be skewed due to the ‘weekend effect’. This compares to the slight jump of 816 and 784 new virus cases seen on 24 and 25 July respectively.The rise comes amid localised outbreaks, with a farm in Bavaria seeing more than 500 people quarantined after 174 workers were tested positive for the virus.RKI estimates the 4-day virus reproduction rate to be at 1.22 and the 7-day average to be 1.16 as of yesterday; keeping above the threshold of 1.00.There have been concerns about the rising cases across the country, with the virus reproduction rate keeping above 1.00 threshold (it was 1.3 on Saturday) while daily new infections rose by 1,130 on last Friday.On the latter, that has seen the 7-day average in terms of cases rise above 1,000 for the first time since early June.Local authorities are warning about complacency but besides , they are maintaining their course to keep the economy running.

The situation in Italy appears relatively ‘under control’ with 275 new cases reported in the past day. Regional governments are continuing to stay prudent by reinforcing the need to wear masks in public spaces so that is encouraging.The slight rise in cases in Spain is seeing countries take notice with the UK imposing a 14-day quarantine for travelers from the country, following Norway’s decision to reimpose a 10-day quarantine as well for people arriving from Spain.This comes amid a surge in cases in Catalonia but the Spanish government’s virus expert has warned that the infection is already spreading among the general community in Barcelona and Zaragoza – saying that the rate of contagion has tripled.French prime minister, Jean Castex, has also “strongly recommended” its citizens to avoid going to Catalonia (the border remains open) though the region itself announced closure of bars and nightclubs for 15 days on Friday last week.Catalonia (counted separately from Spain’s total) itself reported nearly 1,500 new cases on Saturday, as the number of new cases in the region is starting to pick up again.Despite warnings of complacency and what not, local authorities are continuing to reaffirm that these outbreaks are “localised” and have not spread out of control. The right now remains on the – or at least continuing down that path.In due time, we’ll see how this all plays out but no doubt further reopening of international borders are going to be extremely tricky.The positive takeaway is that the death rate in most places isn’t as high as when the initial outbreak began but as infection numbers rise, there could be a delayed effect on that as medical capacity also starts to be burdened even more.

ECB: Euro area GDP could shrink by 5% to 12% this year

  
  Analysis
#  #  #  #  #  #  #

ECB notes in a pre-release of its economic bulletin

ECB
  • Euro area real GDP could fall by around 5% (mild scenario), 8% (medium scenario), and 12% (severe scenario) this year
  • Under the severe scenario, Q2 quarterly real GDP growth could be -15%, followed by a protracted and incomplete recovery; +6% in Q3, +3% in Q4
  • Under the severe scenario, real GDP is expected to remain well below the level observed at the end of 2019 until the end of 2022
The headline isn’t so much of a surprise since it is the same as what Lagarde has already highlighted in her press conference yesterday. This just adds more colour to it. In case you missed Lagarde’s remarks, you can check them out here and here (Q&A).

Economic data coming up in the European session

  
  Analysis
#  #  #  #  #  #  #  #  #

Eurozone October final inflation reading in focus today

Comic 15-11

Happy Friday, everyone! Hope you’re all doing well as we look to get things going in the session ahead. Risk trades are in a better mood today with some recovery seen in yen pairs and gold is also lower to start the day.

Meanwhile, equities have nudged higher while bond yields are also faring better as the Trump administration talk up hopes of a trade deal.

Looking ahead, there is little on the economic calendar in Europe to really shift the dial so we may be in for a more quiet one barring any major headlines to cross the wires.
1000 GMT – Eurozone October final CPI figures
The preliminary report can be found here. As this is the final release, it isn’t expected to have much – if any – impact on markets as a whole.
1000 GMT – Eurozone September trade balance data
Prior release can be found here. An indication of trade conditions in the euro area region but the data is a bit lagging as this pertains to Q3 economic performance.
1000 GMT – Italy October final CPI figures
The preliminary report can be found here. Focus is on the overall Eurozone release so the report here will matter little, and even more so since this is the final release.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading!

IMF is $318 billion short of solvency

  
Economy, Education
#  #  #  #  #  #  #  #  #  #  #  #  #

Those observing the emperor’s lack of clothing are multiplying. Earlier today, someone opened their mouth, and remarked on the blatantly obvious. Next thing you know Hungarian CDS was 30% wider, Romanian bond auctions were failing, the euro was tumbling, the PPT was scrambling, US markets closed green with nobody trading, etc. Yet the “letting the genie out of the bottle” award of the day has to go to the head of IMF’s policy-steering committee, Youssef Boutros-Ghali who said that the IMF is essentially insolvent in its current form of being the go to backstop for a European bailout. “If we are going to start including funds made available to Europe, then the IMF is not properly resourced,” Youssef Boutros-Ghali told Reuters, adding that IMF members were talking of doubling the amount of SDRs. The means the IMF is $318 billion short of solvency. And what is the IMF long? Why gold…3,005 tonnes worth.

The IMF has to have more resources after the support for Greece and needs to “very significantly” increase the amount of special drawing rights, the head of the Fund’s policy-steering committee said on Friday.

What does this mean in English? The IMF currently has 204 billion in allocated SDR to member countries (or $318 billion). Boutros-Ghali has basically said that in order to preserve its front-man status as a world bailout force (just because the Fed knows that the political whiplash of it being the bailout provider of last resort would mean the end of it, thus needing a strawman such as the IMF), the IMF will need to raise another $318 billion. Where will the IMF get that money? Here’s an idea: the IMF holds 3,005 tons of Gold. At today’s fixing, this equates to just over $116 billion (and much more should the price of gold mysteriously skyrocket). Of course, any fiction that the SDR is backed by gold will then disappear, but it’s not as if anyone even remotely pretends that any fiat currency (and the SDR is no exception) has any value left whatsoever. And since the US will end up having to fund the bulk of the SDR allocation, at least US taxpayers would be on the hook for a far more manageable $200 billion that the IMF needs in order to fully bail out Greece and everyone else in Europe.

 

A Lesson from Einstein

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #

A lesson I learned from Einstein is the benefit of being able and willing to changes one’s mind. At times a pacifist, he changed after witnessing the rearmament in Europe. In physics and science in general when presented with new evidence it is quite normal to revise theories and mathematical proofs, or even to reverse a position entirely. Putting ego aside, he did this many times, most famously dropping his famous Constant variable regarding a static universe when through experiment it was proved no longer necessary. This is skill which comes more naturally at a younger age, but is quite possible for the post 40 crowd as he demonstrated in his long career.

Mario Draghi's Favorite Joke

  
Education, Humour
#  #  #  #  #  #  #  #  #  #

In his latest “What Next in The Global Economy” note, Morgan Stanley economist Joachim Fels passes along the following little story about Mario Draghi:

 Who said central bankers have no sense of humour? During a recent dinner at Frankfurt’s Senckenberg Museum (the home of Germany’s most extensive collection of dinosaurs) Mario Draghi told the crowd his favourite joke:

A man needs a heart transplant. Says the doctor: “I can give you the heart of a five-year old boy.” “Too young.” “How about that of a forty-year old investment banker?” “They don’t have a heart.” “A seventy-five year old central banker?” “I’ll take it.” “But why?” “It’s never been used!”

I like the joke, and not only because I consider myself an economist working for an investment bank rather than an investment banker. Mario Draghi’s joke conveys a simple but important message: central banking is about making rational, cool-headed and unemotional decisions in often difficult circumstances. In the 15 years of its existence as the keeper of the euro, the ECB led by Mario Draghi and his predecessors Jean-Claude Trichet and Wim Duisenberg has had to make a lot of difficult decisions in difficult circumstances. A few of these decisions were questionable (though typically only with the benefit of hindsight), such as the rate cut in April 1999 or the rate hikes in July 2008 and in April and July 2011. Most of the other ECB decisions were just right or even hugely successful – just think of Mario Draghi’s announcement in July 2012 to “do whatever it takes” to safeguard the euro. (more…)

Latest Headlines From Europe

  
Analysis, Economy, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Time for European headlines. Because we haven’t had any in about 3 minutes or so. Courtesy of Bloomberg, here is Angela Merkel doing her best channeling of Hank Paulson.

  • MERKEL SPEAKS AT TRICHET FAREWELL IN FRANKFURT
  • MERKEL SAYS EURO IS STABLE, HAS PROVED ITSELF IN TURBULENT TIME
  • MERKEL SAYS IF THE EURO FAILS, EUROPE FAILS
  • MERKEL SAYS EUROPE STANDS BEFORE SIGNIFICANT CHALLENGES
  • MERKEL SAYS EUROPE MUST BE READY TO USE UNCONVENTIONAL TOOLS
  • MERKEL SAYS ‘WE SHALL NOT ALLOW’ EURO TO FAIL
  • MERKEL SAYS NEXT EU SUMMIT IS `NOT THE END POINT’ FOR CRISIS

And most importantly…

  • MERKEL SAYS NO ‘MAGIC WAND’ TO SOLVE EURO DEBT CRISIS
  • MERKEL SAYS PAST ERRORS WILL NOT BE SOLVED IN ONE STROKE

True, many, many strokes will be needed. But what about the market which has already priced in not only the Magic Wand but the Quidditch match victory over Slitherin. What now?

Go to top