Tag Archive: Europe

Europe Comes Apart, And That’s Before #4

In May 2018, the European Parliament found that it was incredibly popular. Commissioning what it calls the Eurobarameter survey, the EU’s governing body said that two-thirds of Europeans inside the bloc believed that membership had benefited their own countries. It was the highest showing since 1983. Voters in May 2019 don’t appear to have agreed with last year’s survey.

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FX Daily, May 28: Risk Appetites Curbed, US Leadership Awaited in FX

Overview:  The euro initially reacted positively to the EU Parliament elections.  The populists did not do quite as well as many expected.  The two main groupings failed to secure a majority, but with the help of the Liberals, and possibly the Greens, that did well throughout Europe, a new European Commission will be forged.  The heads of state meet later today, but no real decisions are likely.  The horse trading will likely take most of the next...

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What’s Germany’s GDP Without Factories

It was a startling statement for the time. Mario Draghi had only been on the job as President of the European Central Bank for a few months by then, taking over for the hapless Jean Claude-Trichet who was unceremoniously retired at the end of October 2011 amidst “unexpected” chaos and turmoil. It was Trichet who contributed much to the tumult, having idiotically raised rates (twice) during 2011 even as warning signs of crisis and economic weakness...

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FX Weekly Preview: Important Steps Away from the Abyss

It seems to be well appreciated among by policymakers and investors that the system is ill-prepared to cope with another financial crisis. It is understandable that so many are concerned that the end of the business cycle could trigger a financial crisis. In practice, it seems like it has worked the other way around. The financial crisis triggered the Great Recession.

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The World Economy’s Industrial Downswing

As economic data for 2019 comes in, the numbers continue to suggest more slowing especially in the goods economy. Perhaps what happened during that October-December window was a soft patch. Even if that was the case, we should still expect second and third order effects to follow along from it.

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It’s Not That There Might Be One, It’s That There Might Be Another One

It was a tense exchange. When even politicians can sense that there’s trouble brewing, there really is trouble brewing. Typically the last to figure these things out, if parliamentarians are up in arms it already isn’t good, to put it mildly. Well, not quite the last to know, there are always central bankers faithfully pulling up the rear of recognizing disappointing reality.

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That’s A Big Minus

Goods require money to finance both their production as well as their movements. They need oil and energy for the same reasons. If oil and money markets were drastically awful for a few months before December, and then purely chaotic during December, Mario Draghi of all people should’ve been paying attention.

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FX Weekly Preview: For the Millionth Time, Markets Exaggerate

The S&P 500 fell more than 12% in a few weeks. The 10-year Treasury yield fell nearly 40 bp. There were cries that the sky was falling. A recession is imminent, we are warned by prognosticators. The Fed went ahead and raised interest rates on March 21, 2018, and the S&P 500 proceeded to gap lower the next day and continued to sell-off the following day. Investors did not like the unanimous decision.

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Just In Time For The Circus

Just in time to follow closely upon yesterday’s European circus, IHS Markit piles on with more of the same forward-looking indications looking forward the wrong way. Mario Draghi says the ECB is ending QE, good for him. The central bank will do this despite balanced risks rebalancing in a different place. The more bad news and numbers stack up the more “they” say it’s nothing just transitory roughness.

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‘Paris’ Technocrats Face Another Drop

How quickly things change. Only a few days ago, a fuel tax in France was blamed for widespread rioting. Today, Emmanuel Macron’s government under siege threatens to break its fiscal budget. Having given up on gasoline and diesel, the French government now promises wage increases and tax cuts.

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The Direction Is (Globally) Clear

It is definitely one period that they got wrong. Still, IHS Markit’s Composite PMI for the US economy has been one of the better forward-looking indicators around. Tying to real GDP, this blend of manufacturing and services sentiment has predicted the general economic trend in the United States pretty closely. The latter half of 2015 was the big exception.

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Harmful Modern Myths And Legends

Loreley Rock near Sankt Goarshausen sits at a narrow curve on the Rhine River in Germany. The shape of the bluff produces a faint echo in the wind, supposedly the last whispers of a beautiful maiden who threw herself from it in despair once spurned by her paramour. She was transformed into a siren, legend says, a tantalizing wail which cries out and lures fishermen and tradesmen on the great river to their death.

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ECB (Data) Independence

Mario Draghi doesn’t have a whole lot going for him, but he is at least consistent – at times (yes, inconsistent consistency). Bloomberg helpfully reported yesterday how the ECB’s staff committee that produces the econometric projections has recommended the central bank’s Governing Council change the official outlook. Since last year, risks have been “balanced” in their collective opinion.

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Europe Starting To Reckon Eurodollar Curve

We’ve been here before. Economists and central bankers become giddy about the prospects for success, meaning actual recovery. For that to happen, reflation must first attain enough momentum. If it does, as is always forecast, reflation becomes recovery. The world then moves off this darkening path toward the unknown crazy.

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Global PMI’s Hang In There And That’s The Bad News

At this particular juncture eight months into 2018, the only thing that will help is abrupt and serious acceleration. On this side of May 29, it is way past time for it to get real. The global economy either synchronizes in a major, unambiguous breakout or markets retrench even more.

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The Top of GDP

In 1999, real GDP growth in the United States was 4.69% (Q4 over Q4). In 1998, it was 4.9989%. These were annual not quarterly rates, meaning that for two years straight GDP expanded by better than 4.5%. Individual quarters within those years obviously varied, but at the end of the day the economy was clearly booming.

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Europe’s Woes Multiply

The Markit group that provides many of the PMI surveys noted with today's reports that the eurozone outlook has "darkened dramatically." This makes for a poor backdrop for the ECB, which meets next week. However, with price pressures recovering from the Easter-related distortions, the ECB is still on track to finish its asset purchases at the end of the year. This seems largely taken for granted.

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What Really Happened In Europe

The primary example of globally synchronized growth has been Europe. Nowhere has more hope been attached to shifting fortunes. The Continent, buoyed by the persistence of central bankers like Mario Draghi, has not just accelerated it is actually booming. Or so they say.

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US Imports: A Little Inflation For Yellen, A Little More Bastiat

US imports rocketed higher once again in December, according to just-released estimates from the Census Bureau. Since August 2017, the US economy has been adding foreign goods at an impressive pace. Year-over-year (SA), imports are up just 10.4% (only 9% unadjusted) but 9.3% was in just those last four months. For most of 2017, imports were flat and even lower.

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