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German IFO Business Confidence Highest Since July, Sends EURUSD Briefly Over 1.33

Tyler Durden's picture




 

The phenomenon of market and confidence reflexivity is quite well known to the US, where not one but two indices, the UMichigan and Conference Board, provide upward boosts to the market when the market is going up, which in turn boosts confidence even more, and so on in a closed loop well used by agents of the central planning bureaus, especially during economic slides, when the "economy" is nothing but the Russell 2000. Europe is no stranger to this, and early this morning despite Germany's recent economic data coming out nothing short of atrocious, Germany announced its business managers are quite confident, and more so than expected whatever that means, after the IFO Business Survey printed at 109.6 on expectations of 108.3 - the highest reading since July 2011. As a reminder, 9 days ago "The German Industrial Output Slides More Than Greek, Despite Favorable ZEW" - in other words, the propaganda machine is out in full force, desperate to break the linkage between Europe's recessionary economy, and the market which has soared over the past 4 months for one reason only - trillions in central bank liquidity. Alas, the bill has now come in in the form of record Brent in British pounds, fresh all time highs in energy prices, and WTI which if Goldman is right, will hit $120 this summer and send Obama's reelection chances down the toilet. Anyway, here is Goldman with a note on the German confidence index which briefly sent the EURUSD up 80 pips to a high of 1.3340, showing just how volatile the fulcrum security now is with 148K net shorts, since retracing most of the gains as apparently not even the market is that stupid to believe the confidence is more important than hard data following the EU's announcement that the Eurozone will officially see a GDP decline of -0.3% in 2012 vs previous expectations of +0.5% rise.

From Goldman Sachs

IFO Business Survey - Further improvement

 

The February Ifo business climate index rose further to a level of 109.6 after 108.3, its highest reading since July last year.

 

“Business conditions” rose to 117.5 after 116.3, while “business expectations” increased to 102.3 after 100.9.

 

This is a very solid report and in particular the fact that the assessment of “business conditions” has now also started to improve suggests that the German economy is, after a small decline of economic activity in Q4, back on an expansionary path. The further increase in expectations – the third consecutive increase – shows that German corporates do not think, at least on average, that the Euro debt crisis will be a major risk factor when it comes to their own business.

 

Looking at the different sectors it shows that the rise in confidence was spread across the economy with manufacturing, construction, whole sale and retailers all recording increases in February.

 

The fundamental drivers of this rising confidence are easy to identify: a pick-up in the global industrial cycle, coupled with very easy financial conditions for the corporate sector and no headwind from fiscal tightening all imply a solid starting position from which the economy can regain momentum.

 

Today’s Ifo also puts yesterday’s flash PMI into perspective. Monthly data are volatile and the rise in the Ifo suggests that some of the relative disappointment in the PMI should be discounted (though there is still a clear improvement in the PMIs when compared to Q4 last year).

So according to Goldman ignore the bad PMI data because businesses are more confident courtesy of a transitory bump in markets that has now awakened the inflation dragon which will now tear apart profit margins? Just brilliant.

 

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Thu, 02/23/2012 - 08:21 | 2188509 fightthepower
fightthepower's picture

Fuck you Bernanke!

Thu, 02/23/2012 - 08:21 | 2188510 Robslob
Robslob's picture

CONfidence bitchez!

 

 

Thu, 02/23/2012 - 09:01 | 2188557 CPL
CPL's picture

Confidence derived from being less shitty than your neighbours.

 

Glass houses...something something...rocks...something something.

Thu, 02/23/2012 - 08:37 | 2188513 Ghordius
Ghordius's picture

"the propaganda machine is out in full force" Time for some unpopular statements:

here in Europe there is so much less propaganda. particularly in the non-english parts. yes, there is propaganda - I'm not talking about quality but quantity.

and it's so much less heated, opinionated, shrill and nerve-wrecking... must somehow give nerves out of steel...

take the euro, for example: it's just a currency, for criminy. somehow some US and UK commentators exploiting the investing masses have made a mythical beast out of it, either eating babies or shitting gold...

or take the typical (smaller) banks in the eurosystem: they work in a different environment, less commercial bonds, less IPOs, less stocks, more direct lending to smaller corporations. less brokerage, more fund management. but some shills make them sound like some other fabled beast of mythical proportion...

Thu, 02/23/2012 - 08:29 | 2188515 Voltaire
Voltaire's picture

Maybe because the indutrial output statistic is history and the confidence indicator is about the future...how about that?

Thu, 02/23/2012 - 08:32 | 2188520 TooBearish
TooBearish's picture

SPR release in 3...2....1.....

Thu, 02/23/2012 - 08:34 | 2188522 papaswamp
papaswamp's picture

Survey was done when Euro was below 1.30...if it continues to rise that confidence will vanish. Germany needs a crappy Euro to stay compeditive....that is why they are holding onto the PIIGS. The problem comes when they take on too much debt and realize the the PIIGS aren't able to pay it back. The can being kicked is turning into a 55 gal drum....

Thu, 02/23/2012 - 08:40 | 2188525 Azannoth
Azannoth's picture

The Consensus has been reached on Confidence, Optimism, Good Humor, Wishful Thinking and Apathy so go back to your daily scheduled program as everything is clearly Contained and Priced In

Thu, 02/23/2012 - 08:41 | 2188530 Robslob
Robslob's picture

 

 

Confidence = Slope of Hope?

Thu, 02/23/2012 - 08:56 | 2188550 ISEEIT
ISEEIT's picture

I wouldn't get to excited by the notion of $120.00+ brent working against obama & friends. The ministry of truth is all over that one. The tales being spun by the A.P. and other corporate sources are absurd to the point of amusing. It appears that more than a few North Korean 'experts' now work for some major 'news' producers here in the U.S.

obama has this covered on both ends..If Ben's paper keeps the bubble intact, it's obama almighty, if it pops, it's wallstreet, and only lord obama can save the people.

They have been planning this for a long time.

Thu, 02/23/2012 - 09:17 | 2188572 Martin W
Martin W's picture

German UFO confidence

Thu, 02/23/2012 - 09:26 | 2188574 Die Weiße Rose
Die Weiße Rose's picture

there is no doubt that German Companies are doing incredibly well

with record numbers in exports, profits and contracts world-wide and that's no hype !

German Companies are often family owned and highly specialized and innovative and very efficient and therefore successful. Even though European joint venture EADS has just missed out to the French defense group Dassault.

French Companies have been doing very well lately: The Indian Air Force needs 126 new fighter jets - and just ordered them from the French defense group Dassault. Dassault confirmed on Tuesday its Rafale fighter aircraft had been selected by the Indian Air Force.  The amount of the contract is estimated to be around ten billion dollars.

01/31/2012
 
New Delhi/Paris- It is one of the world's currently largest defense contracts: The Indian Air Force needs 126 new fighter jets - and they ordered the French defense group Dassault. This leaves the Franco-German company EADS empty-handed. There had been high hopes to sell the Euro- fighters to India.

Dassault confirmed on Tuesday its Rafale fighter aircraft had been selected by the Indian Air Force. There was jubilation in the Élysée Palace: President Nicolas Sarkozy secured the "full support" to the French government. He spoke of a "fair and transparent" competition for the job. The Rafale jets were obtained for the total cost has been selected for their durability. Even in India media reports said the French had made the better offer.

India wants to modernize its air force and it has taken in April of last year, the number of offers from €uro Typhoon and the French Rafale aircraft in the short list. The amount of the contract is estimated to be around ten billion dollars.

The order from India is the first foreign order for the French Rafale.

In the summer Chancellor Angela Merkel had lobbied hard during a visit to India to promote the EADS for more than 126 €uro Fighters. The French government on the other hand promoted the Rafale from Dassault.

EADS is a European joint venture.
pcs / Reuters / dpa / AFP

http://www.spiegel.de/wirtschaft/unternehmen/0,1518,812543,00.html

I wonder whatever happened to the

US Strike-fighter ?

wr;)

Wed, 07/25/2012 - 03:43 | 2648225 mediaprizm
mediaprizm's picture

I`m getting a full sleeve inspired by you guys as soon as possible.... haven`t figured out what it`s exactly gonna look like, but it`s coming together slowly. Fulfilment Solutions

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