The slightly hawkish HICP print from Germany today has sent yields higher despite the CPI metric surprising dovishly. Meanwhile, the recently released Ifo details hint of a potential comeback in the German economy, which is far from consensus.
![Ifo Watch – Is Germany rebounding against all odds?](https://stenoresearch.com/wp-content/uploads/2023/01/WS-Europe-1080x675.png)
The slightly hawkish HICP print from Germany today has sent yields higher despite the CPI metric surprising dovishly. Meanwhile, the recently released Ifo details hint of a potential comeback in the German economy, which is far from consensus.
How Germanys constitutional debt brake could hinder the green transition of Europe and leave Germany at the bottom of the leaderboard in the race towards fiscal deficits.
The spill-overs within German regional banks from the CRE crisis are increasing. Will this turn into a topic for the ECB or for German politicians?
We’ve just had this month’s IFO details earlier, and despite some calling for a sequentially better print, it came in below par – as we rightfully expected. Read along for a brief digestion.
The oil market remains muted despite record high US demand, but the supply side is not as weak as anticipated, which has even wrongfooted the OPEC group. Meanwhile, mother nature doesn’t play with a long bet in Nat Gas.
It’s Wednesday and that means time for another 5 things we watch where we hone in on the things that we have been most interested in over the last week.
The duration scare is back after a weak 30yr auction. We are yet to enter a home-run environment for USD durationistas, but a flatter curve may be on the cards until the December FOMC-meeting.
Early regional evidence suggests that we will see a dovish surprise to the EUR-flation numbers this week as we forecasted. Will the Fed and the BoE be convinced of similar dovish inflation trends when they meet?
Inflation is likely going to drop just below 2% in Europe/Germany, but there are signs of bottoming price pressures in the IFO Survey, while the Chemicals sector keeps improving orders/inventory ratios.
There are signs of a pick-up in German activity in the details from the IFO survey. A long in Nat Gas looks increasingly compelling, while US Manufacturing keeps rebounding as well.
Our services week is hot and running, where we share our take on the rebound in manufacturing amidst a weakening in the services sector. Today we will share some of the takes we have looked at, as well as what lies ahead
We just got the release of Spanish and German Regional CPI this morning, and with the two making up 40% of the EU HICP basket, there might be some information to extract from today’s prints.
A brief nugget about today’s headline Ifo numbers. We’ll release an article about the full report next week.
Just as the weak growth surveys in Europe had established a short-term downtrend in EUR rates, the inflation ghost is back wreaking havoc with that narrative. The inflation numbers from Europe were not that bad, but markets are heavily positioned in long bonds.
Benign opening after a volatile weekend with no signs of an increased risk premium in energy/grain markets, while bonds open bid. The inflation numbers will dictate the trends this week.
We have not been shy about our euro skepticism lately (to say the least) but as we now trade it, I thought it only appropriate to add some broader context to it. The way I perceive and understand the Eurozone I owe much to the influence of Edward Hugh who is sadly not with us anymore. I had him in mind writing this piece
With weak economic data coming out of Germany expect internal pressures on the government to be hawkish on a European level to please its own disgruntled citizens and avoid losing voters.
IFO seems to have peaked, and Germany likely already is in some sort of recession. Will the ECB care? And will EUR + DAX bulls care? FOMC Minutes reveal increasing divergence of views within the board.
While everyone is looking at Europe for safety we are taking the other side of the trade. The unbalances of the Eurozone haven’t gone away and with inflation & dark clouds on the horizon, we question whether an indebted fragmented economy can hold fast as the economic winds turn unfavorable. Lagarde is running out of bullets and fiscal ammunition is in short supply
Several indicators are starting to roll over in Europe, which may be at odds at with the current positioning in markets. Meanwhile, the loan officer survey continued to tighten, but not to alarming levels. The demand side of the credit equation is doing much worse than the supply side.
With German CPI being released today we have taken a deeper look into the wage negotiations in Germany, which might give a hint to how inflation dynamics will evolve in the future. Follow along in this short piece!
Another day, another direction for rates. Banks are driving the show and the underlying question remains. Is this a true banking crisis or is it a tempest in a teapot? As true macro investors, we prefer to take a step back from the daily noise and watch the underlying trends. Amidst a renewed hawkish repricing yesterday the M2/M3 money growth measures were released in the Euro area. We have never seen the kind of destruction of money (and hence deposits) in the history of the Euro zone and if we look at similar data in the US, it looks even worse. The underlying quarterly growth numbers of money in Europe and the US are running at historically destructive levels. This is the true underlying reason for the deposit flight/destruction and the monetary policy is simply too tight by now. Chart 1: The quarterly pace of negative money growth in Europe is historic The trend remains very uniform across the West. Money growth is falling of a cliff from a sequential perspective and the banking crisis is likely to accelerate the trend as M2 growth is linked to the risk appetite of credit departments of banks. When various emergency facilities at the Fed (and other central banks) are getting maxed out, it is not a signal that banks are willing to add to the risk profile, rater the contrary. We know this drill and it is not reflationary. There is one spot on earth, and basically one spot only, with a […]
Will the cyclical upswing be confirmed in European PMIs and German IFO numbers? Markets clearly lean that way, while bets are being removed on a more hawkish BoJ.
German inflation surprised on the low side of expectations and meanwhile Villeroy from the ECB also confidently talks about waning inflation. The bar remains high for a further hawkish repricing of central banks.
Is the Chinese reopening a true game-changer and how will the attacks in Iran over the weekend alter the geopolitical risk picture for energy markets? We provide our takes alongside updated price signals on oil and natural gas. “We are happy when people/things conform and unhappy when they don’t. People and events don’t disappoint us, our models of reality do. It is my model of reality that determines my happiness or disappointments.” – Stefan Zweig 3Fourteen Research: The true story on the Chinese reopening The China reopening story has fueled oil’s 2023 rise. Read the last sentence carefully. I specifically said the China reopening “story.” Said differently, it has not been the reopening of China that has propelled oil to this point. Rather, it has been the “story” of the reopening. Three weeks ago, we dug into oil’s physical market. Back then, we argued that oil could not divorce from its physical reality for very long. With that said, over short time horizons, oil regularly divorces from the physical market. Ultimately, to make an educated guess of where oil is going, you must understand both the physical and paper markets. Today, we take a look at the paper market and how we incorporate it into the 3Fourteen Core Crude Oil Model. At present, the Model remains Neutral (components below). The physical and technical components are bullish. The inventory component is bearish. And, the positioning (i.e. paper or futures) component is neutral. We account for the paper market in the “Positioning” […]
European equities have seen an incredible start to 2023 on top of strong performance in late 2022. But European manufacturing and tech finds itself under pressure from massive public investments in both the US and China. What to make of the EU’s response and how is the outlook for Europe?
The media is full of doom and gloom around Europe, and even though the situation is admittedly bad, I tend to think that the likely outcome is less bad than feared by many. Here is why!