Europe "Fixed" Facade Crumbling As German Retail Sales Implode

Tyler Durden's picture

Remember all those soaring German confidence indices that said ignore the negative GDP print and focus on a future so bright, ze Germans've got to wear Zeiss? Appears the confidence may have been a tad massaged upwards because following a spate of weak corporate results out of Europe's growth dynamo, the German HDE retail association said Christmas sales for November and December were down some 0.7% from the prior year. Specifically German retail sales plunged -1.7% from November on expectations of a modest -0.1% decline, while on a year over year basis December imploded a whopping -4.7% vs expectations of -1.5%. Did the Germans blame the weather of lack of government spending, or maybe say to only focus on the positive aspects of the report (if any)? No. They were not girlie men about it.

Elsewhere in Spain, inflation rose less than expected, as consumer prices rose 2.8% Y/Y - the slowest pace since August and less than the 3.1 percent increase economists predicted. This was somewhat surprising as the country posted a boost in its current account with the November surplus amounted to €1.8 billion compared with €865 million in October and a deficit of €3.9 billion a year earlier, the Bank of Spain said. That narrowed the cumulative shortfall for the first 11 months of 2012 to €13.1 billion from €33.6 billion in 2011. A big reason for this is that central banks and other banks rotated into Spanish bonds on the false assumption that Spain is fixed. Ironically, even the SNB said that it had boosted its AA rated bonds holdings, while trimming their AAA holdings in Q4.

In now traditional news, Greek retail sales in November followed suit and plunged just a tad more than in Germany imploding by some -16.8% in November. Remember: once they hit 0 they can only go up.

But the biggest news certainly was Germany, whose economy continues to deteriorate and is probably what spurred Buba president Jens Weidmann to say that ongoing bailouts could threaten the strongest members.

“If things stay the way they are, the consequences of unsound policies will be too easily passed on to others,” Weidmann said in Berlin late yesterday. “Sooner or later the economically solid countries will be weakened. Liability and control have to be brought into balance.”

Germany, Europe’s largest economy, has pledged more than 300 billion euros ($407 billion) in loans and guarantees to help shore up the finances of euro member states such as Greece, Ireland and Portugal. Weidmann, who’s also a member of the European Central Bank’s Governing Council, has argued that policies including the OMT bond-purchase program come too close to the banned practice of financing states by printing money.


Risks that have been shared via bailouts and ECB emergency measures have already reached a “substantial level,” Weidmann said. “If these risks rise, the culture of stability could be eroded as if we had explicit joint liability.”


Germany shouldn’t allow wages to rise too quickly in order to rebalance competitiveness within the euro area, Weidmann said. An increase in wages of even 5 percent would have no impact on the output of crisis-ridden countries, and would instead damage Germany.

But why would he say that if Europe was so very much was fixed?

In European market news, the picture is as follows:

  • Spanish 10Y yield up 2bps to 5.25%
  • Italian 10Y yield up 2bps to 4.33%
  • U.K. 10Y yield down 4bps to 2.08%
  • German 10Y yield down 4bps to 1.67%
  • Bund future up 0.37% to 141.95
  • BTP future down 0.39% to 112.51
  • EUR/USD down 0.03% to $1.3563
  • Dollar Index down 0.03% to 79.26
  • Sterling spot up 0.15% to $1.5824
  • 1Y euro cross currency basis swap down 1bp to -18bps
  • Stoxx 600 down 0.29% to 287.78

Keep an eye on Italy where things are going from bad to worse, and where we will likely see even more catastrophic bank sector revalations as the local election approaches.

More from DB:

Credit markets extended their relative underperformance yesterday in what is becoming an increasingly monitored theme by other asset classes. The CDX IG 19 index widened by a sharp 4.5bp overnight to 90.25bp bringing the series to the widest since the fiscal-cliff agreement reached at the beginning of the year. We highlighted this theme yesterday but to again give some context to the relative underperformance in credit, when CDX IG was last at these levels the S&P 500 was at around 1460. We are now about 2.8% above those levels.

We’ve also heard some comments about an increasing outflow from corporate bond ETFs lately and also more chatter about the ‘great rotation trade’ from FI to equities for a variety of possible reasons (eg. low yields, a growth rebound, relative tight spreads to yields, event risk concerns and credit supply indigestion).

It does feel that the strong technicals in fixed income are now being tested. While the technical picture may change at some point we are not sure it will be a 2013 story. The fact there is huge reliance on keeping over indebted entities funded and the fixed income market generally solvent will ensure that authorities and Central Banks keep yields artificially low for some time yet. So our feeling is that despite the recent wobbles, flows will still come into FI in 2013 which will limit the sell-off.

Away from the US it was similarly a weak day for markets in Europe. We saw major bourses finish the day lower with Italian equities being the notable underperformer. Indeed the FTSE MIB (-3.36%) suffered its biggest decline in about 6 months driven by a 34% fall in Saipem after announcing a big profit warning. The company said it expects a very significant reduction of about 80% in EBIT this year from its onshore business leading to a wave of broker downgrades. A regulatory investigation on a share sale transaction the day before the profit warning has also been launched. Peripheral bond yields also spiked higher overnight with Italian and Spanish 10-year bonds closing +15bp and +6bp higher at 4.317% and 5.225%.

In other news flow, Moody’s has placed Monte Paschi’s Ba2 rating on review for possible downgrade reflecting the considerably uncertainty over the impact of legacy structured trades entered into by prior management. Italian prosecutors are investigating the  bank’s former management for bribery over a series of structured finance trades. Monte Paschi’s shares fell -9.5% yesterday which also didn’t help the moves in Italian equities.

Asian markets are trading weaker overnight with most bourses trading lower across the region. The Nikkei, Hang Seng and the KOSPI are down -0.23%, -0.35% and -0.25%, respectively. Asian credit spreads are also trading wider although the Asia iTraxx index is now off the wides at 115bp , still +3bp on the day. The 10-year UST yield is steady at around 1.98%.

In terms of today we can expect initial jobless claims, the Chicago PMI and Personal Income/Spending in the US. We have a fairly packed data day in Europe featuring retail sales, unemployment and inflation numbers from Germany. We also have PPI and retail sales from France, CPI in Spain and PPI from Italy.

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Whiteshadowmovement's picture

Funny that the DAX's massive multiple expansion (from 11x to 15x) over the course of 2012 was ignored by virtually EVERYBODY.

But it just never corrects and *mysteriously* always has a bid under it at 7800. Truly amazing! Move along, nothing to see here...

GetZeeGold's picture



The Reich has fallen.....and it can't get up.

edb5s's picture

Don't worry guys!  Europe is fixed and so is the US.  To wit: 

"R-Word For U.S. Economy in 2013 is Rebound Not Recession"

From Germany With Love's picture

As long as your neighbors fall harder, everything is a-okay.

mckee's picture

But it's a good looking contraction.


asteroids's picture

Remeber folks, these are the massaged "optamistic" numbers. Since there is not penalty for lying, the real numbers are probably far far worse.

LawsofPhysics's picture

Only -4.7%? Bullish because that "less negative" than -8%!

GetZeeGold's picture



Still working on the revisions. Could be almost anything really.

TotalCarp's picture

Bush's fault... Oh, wait...

youngman's picture

But today they reported a big loss in the was a big miss....did they "lever" the market too....or were they hired by me it seems with the high Euro that is not good for Germany...and also it feels that th EU is slowing even more....?????? strange unemployment number today

css1971's picture

Who can buy German stuff? Recession here, recession there, recession everywhere.

GetZeeGold's picture



Screw the's this global change warming colding crap that is screwing everything up.


Anyone can see that. We need some legislation to make us rich and save the planet.....and we need it now.

Shevva's picture

'make us rich and save the planet.....and we need it now.' - then I suggest you look into how Al Gores doing it, that man has made serious money.

GetZeeGold's picture



That cat could sell a nonproductive media channel to a bunch of Arabs and still come out on top.

youngman's picture

Germany makes the best printing presses in the world...the USA makes their fiat with them.....I assume there is a backlog on those money printers....there is a future for money printers in the next few

Phat Stax's picture

The headline paragraph of this article was particularly well-written.  Whichever Tyler wrote it should get a gold star for today.  A showcase in fact-based, Op Ed "Creative Snark."

youngman's picture

"German unemployment has unexpectedly fallen for the first time in 10 months in January, declining 16,000 to 2.92M vs consensus for a rise of 8,000. The jobless rate dropped to 6.8% from 6.9% in December. "The German labor market is in a good position," says SocGen economist Anatoli Annenkov. "Wages are fairly robust and inflation is coming down. Real income is growing and domestic demand may help the economy to expand again in the first quarter"



youngman's picture

German retail sales -4.7% Y/Y in December vs consensus of -1.6%, with the drop the largest since May 2009. On month, sales -1.7% and -0.1%. Sales fell across the board, with food, drinks and tobacco -4.1% Y/Y, clothes, shoes and textiles -6.5%. However, its worth pointing out that the metric is notoriously volatile and that retailers reported decent Christmas sales." (PR) [Global & FX, Top


Statistics......go figure...hiring up but they are not buying

Silverhog's picture

Germany must get hurricanes?  How about Hurricane Brunhilda.   

Ghordius's picture

Funny you say that, Germany gets some tornados, from time to time

the Tornado is also an european fighter-bomber airplane, so saying on a German plain "Look! Tornado!" can be a bit confusing

LongSoupLine's picture

German beer consumption is lowest in decades. They blame it on...wait for it...

The fucking weather.

Nussi34's picture

Paper consumtion is at all time highs!

Headbanger's picture

Well now Germany can be bailed out by Greece now that all is well there.  Right?

Sudden Debt's picture

YEP! All Germany needs to do is give the money 120 euro's for every 100 euro the greeks will lend to Germany. Than Germany will repay the greeks 150 euro's for every 100 euro's and the Greeks will say they need another 500 euro to repay those first 100 euro's.


thank god math died in 2007...

GetZeeGold's picture



They could just get a bailout from Zimbabwe. They have $217 in hard cash they could bring to the table.


Before you say BS.....I can prove it. This is a hindu news report and everyone knows those guys are neutral.

Sudden Debt's picture

Well I have more in my wallet and normally it should get my through the week.

Maybe they can buy a bus ticket with that 217 dollars and go to Europe? Upon arrival, they'll get a 1100 euro per month "survival" donation and a free house to get them back on their feet... for the next 50 generations...

Sudden Debt's picture

If nobody has money left in Spain, inflation doesn't really have a chance in hell to spike...

Retail sales? Down all over europe.

Industrial output in January look like to drop 2% Y/Y

The reason why inflation is also less worse is a eurodollar 1.357 that says it all.


LawsofPhysics's picture

"If nobody has money left in Spain, inflation doesn't really have a chance in hell to spike..."


Do they still need to eat?  I have always wondered what the "price" of something I refuse to sell was.  This should get intersting.  Hey, at least they can ride big ass waves in portugal...



ZeroAvatar's picture

The Schaden is Hitting  The Freude.

aleph0's picture

According to ADAC last year IIRC, 66% of German private cars are leased.
BTW ... maybe they should check Ebay-Germany to see where all the "retail sales" have gone ! 
Prices in German Highstreet shops are ridiculous IMO - no wonder nobody shops there ; not to mention the "Parking Traps" that cost you 10-20 EUR if you are unlucky.

Whiteshadowmovement's picture

Prices for goods in highstreet shops are beyond ridiculous considering they just sell the same medium quality goods everybody else does for a price that makes me seriously wonder how they even stay in business...

I guess its just the convenience of there being a Kaufhof right in the middle of the city...

Rip van Wrinkle's picture

"....Buba president Jens Weidmann to say that ongoing bailouts could threaten the strongest members"


Christ, how much do they pay these geniuses??

From Germany With Love's picture

They get paid in order to spell out the truth when the whole queen's courtyard is full of slimebags who tell her majesty only what she wants to hear. As such Weidmann isn't overpaid.

shovelhead's picture

+1 for Hans und Franz's girlie mans.

"We're here to PUMP YOU UP!".

Shizzmoney's picture

The Constanza Economy continues......

From Germany With Love's picture

If the German lower to middle-class starts to hurt, the Euro is dead, finished, gone. We Germans are more phlegmatic people when it comes to politics but sufficient hurt springs them into action. And it doesn't take much really broad dissatisfaction to force our politicians to change their approach.

You can't justify all those transfers and liabilities to the citizenry when they are economically spiraling downwards themselves.

TPTB_r_TBTF's picture

Oh no! Not again!

The Germans are springing into "action" again.


John Law Lives's picture

"Remember: once they hit 0 they can only go up."

Maybe at that point every Greek will start dumping all their possessions at foreign pawn shops.  Perhaps that would mark the absolute bottom...


TheEmperor's picture

Anybody else notice the 2+% boner for the UK market this morning??

Did some algo think Beckham going to Paris St. Germain was going to boost their economy?