Futures Slump As Global Q4 GDPs Dump

Tyler Durden's picture

It started overnight in Japan, where Q4 GDP posted a surprising and disappointing 3rd quarter of declines, then quickly spread to France, whose Q4 GDP declined -0.3% Q/Q missing expectations of a -0.2% drop, down from a +0.1% increase, then Germany, whose GDP also missed expectations of a -0.5% drop, declining from a +0.2% increase to a -0.6% drop, then on to Italy (-0.9% vs Exp. -0.6%, last -0.2%), Portugal (-1.8%, Exp. -1.0%, last -0.9%), Greece (down -6.0%, previously -6.7%), Hungary (-0.9%, Exp. -0.3%), Austria (-0.2%, down from 0.1%), Cyprus (-3.1%, last -2.0%), and so on.

To summarize: Eurozone GDP dropped far more than expected, or posting a -0.6% decline in Q4, worse than the -0.4% expected, which was the largest drop since Q1 2009, and down from the -0.1% posted in Q3. And since this was a second consecutive negative quarter of GDP decline for the Eurozone, the technical recession (double dip? triple dip? is anyone even counting anymore?) in Europe too is now official.

Who could have possibly foreseen this disappointing development for Europe? Maybe all those who were warning that for the frail and weak continent the last thing it needed was a surge in the currency, which is precisely what it got in Q4. Sure enough, the EURUSD has tumbled over 100 pips overnight, with more fuel added to the flames courtesy of the ECB's Constancio who added out of the blue that negative interest rates are always possible, and the ECB is technically read if needed - hardly the statement one makes if one wants to push their currency higher.

Sure enough, the EURUSD was trading at just about 1.330 at last check, and likely to test recent support levels.

And since the US futures trade in lockstep with the EURUSD, please don't adjust your monitors: that odd non-green color of the futures is not a malfunction.

Some more from Goldman on the European economic collapse in Q4:

Broad-based negative surprise in largest EMU economies. The country breakdown showed that outturns in Germany, France and Italy were all weaker than expected.

  • Germany: -0.6%qoq in Q4 after +0.2%qoq in Q3. The statistical office does not provide a breakdown by expenditure components (which will be released on February 22), but suggested that domestic demand was mixed: both private and public consumption increased slightly, while investment probably declined strongly. The contribution from net trade to GDP was negative, with the decline of exports outpacing the decline in imports.

  • France: -0.3%qoq in Q4 after +0.1%qoq in Q3. The breakdown by expenditure components was somewhat more positive than the headline GDP reading. Private consumption remained resilient, growing by 0.2%qoq, and public consumption continued to support activity (+0.4%qoq). However, investment declined at a faster pace than in Q3 (-1.0%qoq in Q4 after -0.5%qoq). Overall, the contribution of total domestic demand (excluding inventory changes) was flat in Q4, down from +0.1ppt in Q4. Net trade contributed positively to growth for the second consecutive quarter (+0.1ppt after +0.3ppt in Q3), with the contraction of imports (-0.8%qoq) outpacing the contraction of exports (-0.6%qoq). Changes to inventories shaved 0.4ppt off French GDP in Q4, dragging the aggregate figure into negative territory.

  • Italy: -0.9%qoq in Q4 after -0.2%% in Q3. The pace of contraction of 0.9%qoq (after -0.2%qoq in Q3) in Italy was significantly more acute than expected (Cons:-0.6%qoq, GS: -0.3%qoq). A detailed breakdown of the data will not be available until March 11. The surprisingly weak GDP data come at a sensitive time in the election campaign and could potentially damage support for the existing austerity/reform programme. The parliamentary elections will be held on February 24 and 25.

  • Spain: -0.7%qoq in Q4 after -0.4%qoq in Q3 (already published on January 29). The outturn was also slightly weaker than Consensus and our expectations for -0.6%qoq. The preliminary data release provides no breakdown in terms of output by sector or by expenditure component (to be published on February 28). A weak quarter was, however, expected on the basis of the consumer spending response to September's VAT rise.

Smaller economies - including core countries - in negative territory. Q4 GDP in Portugal was particularly weak: it contracted sharply by 1.8%qoq after -0.9%qoq. Finnish GDP contracted 0.5% in Q4, after -0.3% in Q3, while both Dutch and Austrian outputs were down 0.2%qoq.

Some comments on the EURUSD response, and other currency pairs, after the ugly economic data via Bloomberg:


  • EUR/USD correcting, with outside risk to 1.3260 area, ING’s Chris Turner and Tom Levinson say after GDP data; 1.3430/60 should be the sell area
  • Widening European sovereign CDS spreads may also prove mild EUR negative; watch for interest in short EUR cross trades again with short EUR/NZD increasingly popular
  • Signs of independent weakness in EUR may weigh on EUR/JPY, USD/JPY; break of 93.00 in USD/JPY risks losses to 92.00/92.20 area

Danske Bank:

  • Fundamental case for weaker JPY remains, though pace of weakening may “slow substantially” vs recent months
  • Cites likely candidate for new BOJ governor comments that inflation targets wouldn’t be attainable without JPY correction; USD/JPY in the 90-100 range would mark return to equilibrium
  • May see additional easing linked to April 3-4 BOJ meeting with possible new dovish majority on board
  • Looks for G-20 to affirm that countries’ current policies don’t represent exchange-rate manipulation

Deutsche Bank:

  • Market underestimating negative impact of BoE monetary policy on medium-term GBP outlook, note to clients says
  • EUR/GBP PPP adjusted for CPI 0.81 vs 0.75 a few years ago, wedge between unit labor costs in U.K. and euro zone increasing at even faster  pace; with costs in euro zone collapsing on debt crisis, EUR/GBP PPP likely to rise “even faster” in coming years
  • Gilt market/GBP correlations recently have been turning
  • Targets another 5% move in trade-weighted index, looks for EUR/GBP to reach low 0.90s, GBP/USD to eventually drop to low 1.40s by year end

A more comprehensive recap of the overnight action from DB as usual:

We can't help wondering whether the G-20 summit in Moscow over the next few days will be a case of from Russia with no love to those countries that are being seen as engaging in currency de-basement. One country that is slipping slightly under the radar at the moment is the UK. Sterling continues to slide (-6.2% and -4.4% against the Euro and Dollar in 2013 and -10.4% vs the Euro since last summer's peak) with yesterday's BoE inflation report not helping.

The bank now forecasts that inflation will remain above target for three more years. DB's George Buckley points out that if this is correct it will mean a decade where its overshoots its target for 37 out of 40 quarters. Indeed since the worst global financial crisis in history starting in 2008, UK inflation has now averaged 3.3%. This is perhaps a lesson that if you have control over the printing presses and a flexible currency then inflation is always possible almost regardless of the natural deflationary forces present.

The UK has often been ahead of other countries in this cycle (and not necessarily always in a good way) and it might be the first country to test whether bond investors will tolerate a seemingly weaker inflation anchoring from the central bank. Indeed the continued regulatory demand for fixed income and the prospect of future central bank bond buying might battle it out against fears of constantly higher inflation over the months ahead. This will be a great test case for the rest of the world as to whether financial repression can continue to work in this cycle. Don't underestimate such a force but it’s fair to say that the UK continues to be an economic laboratory for the rest of the world. For the record 10 year Gilt yields rose 11bps yesterday to 2.209% and are now 77bp off last year’s lows. On the currency as much as it feels like this is a recipe for a weaker Sterling (as our FX guys think), after a month of travelling round Europe I can't help thinking that the UK is fairly cheap on a PPP basis - at least in terms of my shopping basket.

Perhaps my McDonalds on the Champs-Elysees wasn't very representative! Also currencies often overshoot for long periods so PPP can be meaningless in the short-term.

Staying on the theme of monetary policy, the Nikkei has managed to hold onto overnight gains of 0.7% after the BoJ announced that it would be keeping the pace of asset purchases and rates unchanged. This was largely expected but in its commentary, the BoJ noted that the Japanese economy had appeared to stop weakening with exports and industrial production showing signs of bottoming. The BoJ also upgraded its outlook and now expects a moderate recovery path, although near term inflation is expected to be around zero. Earlier in the session former BoJ deputy governor Kazumasa Iwata said in a statement that the Yen needs to correct for the BoJ to reach its 2% price target which helped the Yen reverse some of the earlier gains. The USDJPY is now around 93.55 as we type, off the lows of 92.83 about 24 hours ago but still off the highs of 94.46 at the start of the week as we head into the G20 meeting later today.

Iwata, who has been hailed as one of the possible successors to Shirakawa, also said there are many ways for monetary policy to boost the economy including through longer-term JGB purchases.

Elsewhere in Asia, equities are trading with a positive tone with the majority of indices a quarter to half a percent higher on the day. The KRW (+0.24%) is moderately stronger against the USD after the Bank of Korea decided to keep rates on hold overnight. The BoK governor did note that South Korea faces uncertainty due to Japan’s monetary policies. Asian credit is also trading with a firmer tone helped by the lack of new supply in the holiday-shortened week.

Turning back to yesterday it was mostly a day of consolidation for equities as the S&P 500 (+0.06%) closed marginally higher in the absence of any major catalyst. The January retail sales report was encouraging to some as the headline managed to inch +0.1% (in line with consensus) despite the significant tax increase at the start of the year. There were a few Fed speakers overnight. Plosser said that asset purchases should be tapered before interest rate rises. Lacker said that evidence of a credit market bubble arising from current Fed policy of holding long-term interest rates low with asset purchases is “ambiguous and inconclusive”. Bullard sounded more upbeat about growth and house prices but was concerned about a farmland price bubble.

In Fixed Income markets there was further selling bias in the Treasury market yesterday after a mediocre 10-year auction performance. The UST 10-year yield rose 5bp yesterday to 2.028% after the new notes were priced at a yield of 2.046% and attracted a lower bid/cover ratio of 2.68x (vs 2.83x previously). The $16bn 30-year auction later today is probably worth keeping an eye on. Elsewhere in credit the CDX IG finished the day 1.5bps tighter with the street being net sellers of bonds yesterday according to FINRA TRACE. In European credit ISDA declared two credit events yesterday. The first was a Restructuring Credit Event for SNS Bank NV and the second was Bankruptcy Credit Event with respect to Irish Bank Resolution Corp. The news didn’t affect the European senior or sub financial credit indices though, which closed 8.5bp and 14bp tighter respectively.

Looking at the day ahead, the first Q4 Euroland GDP print will be the main European economic release. Market forecasters are expecting the euro area to contract -0.4% QoQ/- 0.7%yoy versus -0.1%QoQ/-0.6%YoY in Q3. Looking at individual countries, Q4 GDP is expected to shrink -0.5%, -0.2%, -0.6% and -1.0% QoQ in Germany, France, Italy and Portugal, respectively. These are weaker numbers compared to +0.2%, +0.0%, -0.2% and - 0.9% for these countries in Q3.

Turning to the second most important event in Russia today, Bloomberg news has reported that the G20 officials will pledge in a joint statement to avoid policies that will lead to competitive currency devaluations and will also oppose trade protectionism. The ministry of finance in South Korea has also issued a statement saying that the G-20 will discuss the effectiveness of the quantitative easing measures in advanced countries and its spill over impact and policy responses by emerging countries. Elsewhere in the US we have initial and continuing jobless claims but the main focus will likely be on Euroland growth numbers and the G20 event in Russia.

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GetZeeGold's picture



What the hell......that almost never happens.

TotalCarp's picture

Can you say "shit sandwich" in every language of the Euro zone? 

Sudden Debt's picture





4. England : HHHMMMMMmmm! Can I have seconds?!

knukles's picture

Sere eyes only one answer.. More vacations.

Josephine29's picture

 I  think that the Portuguese are getting in plenty of practice right now!

The last quarter of 2012 was simply awful

Here are the numbers from Statistics Portugal.

The Portuguese Gross Domestic Product (GDP) registered a year-on-year change rate of -3.8% in volume in the 4th quarter 2012 (-3.5% in the previous quarter),

Ouch! How did we get there?

Comparing with the previous quarter, the Portuguese GDP diminished 1.8%

In essence as discussed above this represents a fading of the export boom which was discussed above as up until now this has hidden to some extent how poorly Portugal was doing in terms of domestic demand. If we look for a little more perspective we now see this.

In 2012, the Portuguese GDP diminished 3.2% in real terms (change rate of -1.6% in 2011).


These are dreadful numbers which prove that the Euro crisis is far from "over"...

Sudden Debt's picture

Oh, awful is awful but at least it's not Heinous....

Sudden Debt's picture

unless.... somebody pressed the red button...

new game's picture

strong dolla, weak oil and pm up? hmmm

sumtin up?

Sudden Debt's picture

yeah... free market..... BWWAAAHHAHAHAHAHAHAHAHAHA!!

tennisdude's picture

But finance 101 says the stock market is a forward indicator! What happened????

Sudden Debt's picture





3..... Obama ... whatever he did, it was the wrong thing...

4. and while I can't prove it just yet... Bush had something to do with it also...


GetZeeGold's picture



This sterile market may have some contamination....better call maintenance and shut it down until we can figure out the problem.

Being Free's picture

Greece (down -6.0%, previously -6.7%)

Steve Lies-man notes Greece has turned the corner and is showing solid signs of improvement!

Sudden Debt's picture

I've heard the same thing :)


And while I was watching the news with my wife, she was like: See, it's getting better!

Now... wife or no wife... that's a starter for a discussing that always ends bad...


Super Broccoli's picture

no it's just there is nothing left to decline in Greece

King_Julian's picture

If you understand that Steve is Simple Jack, it all makes sense.


Never go full retard.

Navymugsy's picture

Greece can't decline past zero can it?

buzzsaw99's picture

G20 officials will pledge in a joint statement to avoid policies that will lead to competitive currency devaluations and will also oppose trade protectionism...


Translate: G20 officals don't give a damn about anyone except their billionaire and banker overlords.

new game's picture

yea the barter economy avoiding tax-up 100 percent

Racer's picture

When all you get is QEasy money printed ad infinitum to prop up banksters at the expense of the 99% and cause inflation in oil and other basics for life and the only increase in real wages is for the rich what do you expect?

Debt-Is-Not-Money's picture

"When all you get is QEasy money printed..."

When all you get is QEasy debt printed...

There is no money, the world is drowning in debt and there is no money to pay it off!

new game's picture

even germany will wake up and realize

'they figured it out'

hope and change

eu style

Rip van Wrinkle's picture

Fuck me, things are looking good. Greece looks like the boom area to the rest of 'em. Long fetta cheese.

NoDebt's picture

But it CAN'T BE HAPPENING.  We've got all this liquidity, see? 

Time for the ECB to go into full Printapalooza mode.  Can't bring back the real economy (if there even is such a thing), but they could at least have to common courtesy to show a positive nominal.



max2205's picture

Bullish. Growth must be around the corner because we've been down so long it feels like up to me

SmallerGovNow2's picture

"please don't adjust your monitors: that odd non-green color of the futures is not a malfunction."

nice touch Tyler(s)...

LongSoupLine's picture


Fuck you you EU parliament fucking pukes. All your fucking propaganda shit filled fucking lies could not cover the fucking truth. Your fucking crooked ponzi experiment is fucking over you fucking horse meat eating pig fuckers. Fuck off.

Downtoolong's picture

Another good excuse to print more. Or, maybe it's another bad excuse to print more. F%^ck, who needs an excuse anymore. Just print more.


fiftybagger's picture

Good.  I just got the last of my shorts on yesterday.  Scratch that.  Linked in is looking tempting here....

smacker's picture

hhmmm. France only declined by -0.3%. That's the new "successful" model for Europe. Slow death -vs- fast death in Greece/Spain.

Hollande will be sending advisors around Europe to provide guidance on how to slow the decline by ever more ludicrous State spending.

youngman's picture

Well they ....the big Kahunas..have not had as many meetings this last quarter...they used to have a big bruhaha every week.....not now since everything has been fixed.....lol...

Bobbyrib's picture

What is wrong with Europe!? When the truth is inconvenient, you just lie. Ask the US, they will tell you. Lie, Lie, Lie. Eventually all your problems just work themselves out. /sarcasm.

GoNavy's picture

You mean a couple trillion dollars of stimulus and over-bloated central bank balance sheets can't overcome at least $50 trillion of de-leveraging?  (Hold on, working on my "shocked" face....)

The "answer" to all this came in 2008/2009, when central bankers and governments could have simply let the world's economies cure themselves holistically by experiencing a sharp, sudden, short-term deflation instead of shouting "Horrors! Liquidity trap!" and setting their printing presses on overdrive.  The fall in prices would have stimulated demand (as it did in the Depression of 1920/21)and the economy would have been self-correcting.  (Of course, in 1920 and 21, people didn't have humongous debt and government didn't have debt equal to more than 100% of its GDP.)

Now, of course, we no longer have that choice, just as Japan no longer has it after spending 200% of its GDP trying to thwart the deflation of Japan's 1990's real estate de-leveraging.  We -- like Japan -- now have massive national debt that will keep us bound to ever-increasing inflation, ever rising nominal prices, and ever-rising nominal wages so that we can repay debt in devalued dollars.

But in the 1990's, Japanese households had solid balance sheets with tons of individual savings.  Had deflation been permitted to occur, the spending spurred by savings and low prices would have created the demand that near zero interest rates and massive government spending have failed to generate.

Economies are self-correcting over the long term. While its possible for central bankers to modify inflation and inflationary expectations by controlling the money supply, the notion that they can prevent a natural course of deflation is not only absurd but dangerous -- akin to trying to bail out the basin at the base of Niagara Falls with a bucket line of volunteers.



Tsar Pointless's picture

Gee. The same day Europe "officially" entered a double-triple-quadruple-dip recession, I decide to start drinking again.


Element's picture

Given propaganda perception rides shotgun over reality these days, if there were a 25% coordinated global trade collapse (like, you know, of real-economies and stuff) would we even know any more?  Perhaps about six months later when the G-(pick a # you like) finally meets and admits that maybe their economies are in a bit of a soft-patch?


thismarketisrigged's picture

o dont worry, the mother fucking futures in the u.s somehow have rebounded from down as much as 70 plus to down just 30.


i am sure no negative gdp print can stop our markets here.


fuck u wall st, fuck u obama, fuck u europe, and fuck u asia, u guys can all go fuck yourselves u manipulated pieces of shits.

Caracalla's picture

This just means QE-5 is that must closer.  Load up on stocks today, Netflix, Groupon, Facebook, Apple, Linked-in, because the train is getting ready to leave the station...Risk On!!!!

Navymugsy's picture

Keep an eye on Cyprus as our GDP will crash harder than the rest of the EU next quarter and we will take the lead! We are the new Greece!