Germany remains the proverbial strong man of Europe, but we are skeptical that this is a fitting moniker. Looking at exports, it is now clear that Germany and thus Europe continues to see weakness. The total value of German exports has now clearly rolled over from its peak in mid-2012, which coincides with the share of total exports going to China.
Our leading indicator for China has turned down further which adds to the impression of an overall weak turn in Chinese growth. We would still term the turning point as intact, but all components of our leading indicator recently came in with negative readings.
France looks increasingly like it is slipping into recession. It is the poorest performing core country – an increasingly inapt label. Highlighting this are the latest PMI numbers. The services PMI, already woefully depressed, slipped lower last month, to 41.9, lower even than Spain’s. The manufacturing PMI was barely much better, falling to 43.9.
We have pointed to the Canadian housing market boom and subsequent bust on several occasions in our reports to clients. Canadian households are overlevered and the housing market has risen to new highs. However, we are now starting to see decisive signs of weakness and consequently and unwind of excess froth in the Canadian housing market.
Margin debt on the NYSE continues to rise, both when looking at the rate of change as well as the level of negative cash balances (lower chart). Overall margin debt rose strongly going into 2013 and is now sitting only…
Short-leading indicators for the US and global economy continue to show very strong signals mainly driven by low credit spreads and strong stock market performance.
The aggregate real global policy rate is still firmly negative due to the commitment to low interest rates in the major G4 economies, but we are seeing notable divergence between economies. The UK remains a textbook example of stagflation while real rates also differ markedly between emerging economies.
This weekend’s Italian elections are provoking a good deal of commentary and fueling mounting concern about possible consequences for the European debt crisis, and in particular for the outlook for Italian sovereign spreads in the short term. We think much of this concern is misplaced, not because we don’t think there is cause for concern, but because people are getting the timing wrong.