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Overnight Summary: German Hope Soars To Three Year High As European Car Registrations Drop To Record Low
Europe's double dipping economy may be continuing to implode, but at least confidence abounds. And while the conifidence game was the purvey of career politicians and ex-Goldman central bankers in January, it has now shifted to Europe's equivalent of the reflexive UMichigan consumer confidence, after Germany's ZEW investor confidence soared to 48.2 vs expectations of a modest 35.0 print, leaving January's 31.5 print in the dust, and the highest since April 2010. And all of the surge was based on the hope, with none attributed to reality, or current conditions. From SocGen: "The positive mood in both the equity and bond markets since the beginning of the year has led to a strong surge in expectations (economic sentiment) in the ZEW survey, a survey completed among German investors. This surge was entirely driven by expectations while current activity remains muted. Expectations in most surveys have recently been rising more strongly than expected, but at one point we expect some moderation. We consider that Germany and the euro area are in a situation of readjusting expectations and activity from the weakness at end-2012. The recovery in expectations may already have overshoot if hard data disappoint in the coming weeks."
And while Europe is starry-eyed with hope about the future, as it is in the beginning of every year, it blithely ignored the fact that new car registrations collapsed in January by 14.2% to a new record low, while construction output in the Euroarea declined for a second month in December, tumbling by 4.8% led by slumping activity in, wait for it, Germany. But this time the future will be different.
Curiously, the massive surge in the ZEW did nothing to spark risk on in Europe, where the EURUSD first spiked higher, then ended lower as the news of the jump was digested, and as the understanding that only disappointment lies in the future spread. Furthermore, as SocGen adds, when asking if this is enough to get algos to buy: "we will probably have to wait until the second LTRO's reimbursement (Friday) and for the outcome of the Italian elections (Sunday/Monday) for investors to look at economic indicators again, and then re-embark on pro-risk strategies. US investors will be preparing for the FOMC minutes published tomorrow. We note that the December meeting minutes (published in January) were surprisingly more hawkish than the FOMC press release. Will the same be true of the January minutes?"
But while Europe's imminent bruising disappointment at hopium not matching reality can be seen from miles, pardon, kilometers away, more troubling news came from Mario Monti, who said earlier that he has nothing in common with the Bersani Bloc. Readers may recall that unless Bersani joins in coalition, he would not have the required 158 Senate seats (and even in that case it would be a nailbtier) to avoid another round of early elections and political gridlock and a virtual halt to "reforms." More from Bloomberg citing Messaggero:
- "Nobody will force us to govern, but those who will want to work with us will find the doors open:’’ Monti in Messaggero
- Possible to cut taxes progressively; property tax on first homes can be reduced without jeopardizing public finances: Monti in Messaggero
- Says if elected his govt would cut size of parliament and ease “fiscal burden on workers and companies:” Monti in Messaggero
- Italy doesn’t need new austerity measures: Monti in Messaggero
As a result of all the above, Europe's markets now stand as follows:
- Spanish 10Y yield down 2bps to 5.21%
- Italian 10Y yield down 2bps to 4.39%
- U.K. 10Y yield down 0bps to 2.2%
- German 10Y yield down 1bp to 1.62%
- Bund future up 0.03% to 142.8
- BTP future up 0.19% to 112.27
- EUR/USD down 0.02% to $1.3348
- Dollar Index down 0.04% to 80.6
- Sterling spot up 0.17% to $1.5491
- 1Y euro cross currency basis swap little changed at -20bps
- Stoxx 600 up 0.58% to 288.42
And whatever happens, don't look at China, where the Shanghai Composite has posted its second steep daily loss after the start of the Year of the Snake.
More from Deutsche Bank:
With US markets closed for President’s Day and no major economic releases in the last 24 hours, the focus has remained squarely on the yen which has had yet another volatile overnight session. Indeed the yen was trading 0.4% higher against the dollar in early Asian trading after a number of comments from Japan’s finance minister Taro Aso. Aso told a news conference that there are no intentions of buying foreign bonds, a day after Prime Minister Abe said such a policy could be an option for future easing. Aso also told reporters that for the time being the government has no plan to revise the BoJ law, also seemingly at odds with Abe’s suggestions to parliament on Monday. The yen has managed to retrace some of its gains though, after the release of minutes from the BoJ’s January meeting where the central bank described the economy as remaining “relatively weak”. Several board members also proposed the extension of the maturity of JGB purchases to around 5 years. As we type the yen is 0.3% stronger against theUSD (93.65) in Asian trading.
Balancing out some of the more dovish statements in the BoJ minutes, outgoing BoJ governor Shirawaka stated that “it was increasingly important to ensure that the public did not perceive such purchases of government securities as having been conducted for the purpose of monetisation”. Speaking of public perception, the Asahi Shimbun has published a poll suggesting that Abe’s Cabinet has increased its popularity since its recent inauguration to 62%, the first administration to increase its popularity since coming to power “in years”.
Amongst respondents, 53% approved of Abe’s policy of setting an inflation target of 2%. Meanwhile, Japan's Chief Cabinet Secretary Yoshihide Suga said on Tuesday that the government will likely propose its candidates for the three top jobs at the Bank of Japan next week when PM Abe returns from his visit to the White House (Nikkei).
In Europe, equities edged lower (Stoxx600 down 0.2%) and bunds were better bid as political worries in Italy simmered yesterday with major political parties beginning their last week of campaigning ahead of next week’s elections. Italian and Spanish equities underperformed, as did their bonds - Italian 10yr bond yields added 2bp to close at 4.404% while Spanish 10yrs added 4bp to close at 5.232%. With recent moves, Italian 10yr yields are now more than 25bp off the January lows, though still around 220bps lower than the peaks seen in the summer of 2012.
The talk on the valuation of the euro continued yesterday with Draghi telling lawmakers at the European parliament that the ECB will monitor the euro through its impact on price stability, a reiteration of his previous stance on the topic. The ECB’s Nowotny sought to downplay talk of the euro saying that the "exchange rate is moving in a range we have had before. We have had no special developments. There is a euro appreciation against the yen but not to a dramatic extent”.
Returning to Draghi’s speech, which covered a wide-range of topics, the ECB President described Ireland’s IBRC promissory note exchange as a “positive” step for Ireland but added that the deal will be reviewed by the ECB in its annual assessment later this year. Draghi reiterated that he expected a gradual growth recovery in the euro zone later this year. On the topic of bank deleveraging, Draghi commented that “proper deleveraging” is crucial, but that the foremost policy challenge was to increase the flow of credit.
Questioned on whether Europe could adopt a BoE-inspired Funding for Lending scheme, Draghi warned against imposing lending conditionality on banks, saying that it could force lending to the “wrong borrowers”.
Turning briefly to Asian markets, regional equities are mostly trading lower overnight with Chinese and Japanese equities leading the losses. The Shanghai Composite and Hang Seng are down 1.25% and 0.3% respectively as property stocks and cyclicals weigh on both bourses after a report in Chinese media that the government may introduce new policies to curb homes prices within the next month (China Business News). The Nikkei is down 0.25% overnight, with yen strength weighing on Japanese equities. Asian credit markets are trading with a firmer tone overnight.
Looking at the day’s calendar, we should have a fairly quiet day ahead of us with the only economic data of note being the German ZEW survey (markets are expecting an improvement on January) and the NAHB housing market index in the US. The EU’s Ollie Rehn speaks this morning in Brussels on the topic of the future of the euro while Italian PM candidate Bersani is campaigning today in the election battleground region of Lombardy.
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Like a rot it creeps into every country, government and business. In a year Germans won't be able to afford a can of beer, maybe then those clueless sheep will snap out of it.
your morning madness: http://vimeo.com/43832369
Hopeful Germans turn to hitchhiking.
Have you heard the good news comrades.....Reggie Love is back in the house. BOOYAH!
Returns to DC with Reggie Love...
marxist soddomite lovers repaint the walls white on AF1 while Chewbacca sets AF1 record for eating lobster tails at one sitting. God I hate these fucking people
Hope - skepticism = misery
the only hope I have anymore is that someone will get some 7.62x39 in stock.
How about that fake investigation into the Heinz insider trading? http://www.reuters.com/article/2013/02/18/us-swiss-inside-trading-idUSBRE91H0S920130218
"Curiously, the massive surge in the ZEW did nothing to spark risk on in Europe".
Hang on a minute Tyler, the DAX is up over 1%!
Should it be? NO! But it is.
DavidC
Got a little hot QE cash still laying around....what would you like to see next?
That's the "seasonally adjusted" number. The non-adjusted number came in at 12. ;)
Plus it's an INVESTOR confidence, if I read correctly. Not a consumer confidence number. We all know one has nothing to do with the other by now.
Pandora's Box, now filled with myriad economic evils and baseless euros of hope.
Ya, German hope was high in 1936, too.....
Sparked the biggest case of road rage the world has ever seen just a few years later.
Yeah... zeppelins where a big deal in those days... I wonder what happened to those...
Hoffnung und Änderung!
Jeder erhält ein Obama-Telefon!
"When you are walking on thin ice ...you might as well dance"...Chuckles the Clown
I think beer consumption was down too....whats up with that
lol, so this is what is bringing the markets across europe up 1 percent plus?
its funny, when europe is down 1 percent plus, the u.s.a never follows europe, but today when they r up, u can bet that the u.s.a will follow europe.
fuck europe, they will soon collapse so hard, no one will know what him them there.
They got to put something in the water supply...
who knows, maybe the horsemeat enhances the hopium effect?
well... they say that they put something in the drinkingwater and that it makes people go dumb...
BUT AT THIS RATE THEY'LL START LICKING THEIR BALLS BY LIFTING THEIR FEET IF YOU LOOK AROUND!
von Manstein about to launch Operation Barbarossa on the USa!
Hahaha, the panzers are coming to wall street. "Vee haff alles zeee kars to sell, vee give you gut discount in zee dolla!"
Ben better have his helicopter ready and drone patrol on alert.
Ven Mutti Merkel comes to Broadway strasse then vee all danz ze Madisonn like mad menschen!
Auf wiedersehen USD hello Euro-deutsch mark!
Sneaky BoJ not rolling over their US bonds is the main factor for the rise in gas prices. Tsuamni's suck no doubt, but debt sucks more.
so... hope... GET'S YOU HIGH?!
ARE WE STILL TALKING ECONOMICS?
I KNEW IT THAT OBAMA GUY WAS A DRUGSPUSHER!!
I don't know why... certain people... just look like drugspushers... and he's one of them.
Car sales in general are bad, I actually got an offer from a lexus dealer to test drive and in return get 75.00, and my GM credit card which i use for gas only that gives you points as rebates actually maxed out a 2000.00 dollars cash back for a new GM. They are in bad shap all of them. I hope the media industrial complex will crumble soon with all the top heavy BS they are brainwashing people with.
even the germans realize their cars are expensive, overengineered and prone to electrical problems. I mean 60K for a fucking 5 series-it's a mid-sized sedan for Chrissake.
yawn, things will only get interesting when germans get angry and find themselves a new angry leader.
Well, these day, people don't registor their cars anymore... YOU NEED ONE, YOU JUST TAKE IT!!
"Expectations for the Eurozone have increased in February. The indicator rose by 11,2 points over last month, it stands currently at 42,4 points. The indicator for the *current* situation in the Eurozone in February has remained practically unaltered at minus 75,6 points." Mind the gap!
Here's the graph (of the expectation, not the current situation). Cognitive dissonance much?
http://www.zew.de/cake/img/article_images/small/konjunkturerwartungen_fe...
Looks like wishful thinking to me, and that "something's got to give" much sooner rather than later
das Auto.
cars ?
people buy horses theses days, not cars, what do you want to do with them ? Can you stuff a lasagna with car meat ?
Germans really start to make trouble. Trying to become energy independent. Have developed process to make diesel from electricity. Have a lot of renewable electricity left over in Germany. So much that they have to pay that somebody is allowing to let this electricity in their nets. Now they want to make diesel out of it.
Now electricity giant ABB division from Mannheim/Basle has found a way to transport electricity over long distance with nearly no losses. Now plan exist to make electricity in sahara cause there is lot of sun and no people and bring electricity to Germany. Crazy these Germans, always make trouble with their crazy inventions and crazy plans always disturbing the old way. And Mutti Merkel is pouring more and more money in crazy projects like this. Creating a new industry of alternative fuel and power creation. Plan to sell this new stuff all over the world. Why can these crazy Germans not stop such things and just dig hole in ground when they need energy. This is the way it was everywhere done and now the German come and want to change everything. This is not fair. They have to buy our oil and gas these huns.