Category Archives: European Economy - 42 posts found

Target2 Imbalances Widen Again – Watch Italy

Target2 – the payment system used for intra-eurozone transfers – has widened again, with the largest two-month move since mid 2012. A look into its breakdown reveals that it is Italy that is almost completely responsible for the increase in…


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Eurozone Growth Stuck in a Quagmire

Eurozone growth goes from setback to setback with last week’s GDP number being just the latest in a long line of similar disappointments. Soft indicators have consistently overstated the strength of this year’s recovery, and the unpleasant truth is that as one country after another has swooned under the summer heat we are down to Spain as ‘last man standing’. Our leading indicators are pointing to anaemic growth ahead for much of the eurozone and Russia’s recent food sanctions on European agriculture will only add to the downturn.


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Excess liquidity and money growth point to weaker second half of 2014

One of the themes we have been tracking in the past 6 months is the slowdown in global money growth and excess liquidity. The focus on the second derivative is important here. The level of growth in liquidity and money growth indicators is decent but the annual growth rate is rolling over.


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European equities to disappoint as earnings fall short of expectations

One of the equity themes we have been highlighting in the recent month is ongoing mismatch between high expectations in Europe relative to lacklustre growth in profitability and growth. European equities are overvalued based on what our models are telling us about earnings and revenue growth this year.


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Market is likely getting ahead of itself on European equities

The composite eurozone January flash PMI showed accelerating expansion led by Germany, but the PMI readings are still only showing moderate growth, considerably below the momentum achieved, for example, in the 2009/2010 green-shoots revival. What growth we do see will be low in comparison with earlier times and if real money growth continues to lose momentum, we might even see renewed weakness.


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Growth Outlook Starts to Cloud

Global growth has been well supported going into this year, and short-leading indicators had intimated this would continue into the latter part of the first quarter.  However, data has become more mixed with some releases giving cause for concern.  Some…


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Strong euro starting to bite on European exporters

Nothing comes for free and with the eurozone periphery deflating its way to a currency account surplus the aggregate external balance of the euro area has increased to its highest level ever at more than 2% of GDP. Coupled with tighter liquidity (less euros sloshing around), improved sentiment and repatriation ahead of AQR the EUR has seen strong support this year.


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Inflation to hold UK recovery back

There are some notable reasons for near-term reasons for optimism in the UK. The housing market seems to be picking up, industrial production growth is looking up together with PMI data and the equity market has done well. All these are real and significant signs of a better economy in the UK, but the structural challenges remain.


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CNBC and Bloomberg interview on the Eurozone and Code Red at central banks

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Variant Perception’s Jonathan Tepper was on CNBC and Bloomberg this week to discuss prospects of deflation in the eurozone as well as his new book Code Red on global central banking, financial repression and what it means for investors.


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Portugal to Reignite Debt Crisis in 2014

The notion of a perfect storm is a tired cliché but in Portugal’s case, its use has rarely been more apt. Our view is that the market is underestimating the risks surrounding Portuguese debt roll-over and planned exit from the…


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