In Europe: A Tenuous Calm

Things continued to stabilize on Thursday across the pond although as usual, that depends on one’s definition of “stabilize”.

The first thing to note is that as tipped by data out of Germany on Wednesday, euro-area inflation beat estimates handily both on the headline and core readings, with the former printing 1.9% (est. 1.6%) and the latter coming in at 1.1% (est. 1.0%).


The euro is off its highs but is up again following yesterday’s rally:


I would say the exact same thing here that I said in the linked post above (on the off chance anyone gives a shit what I would say) – namely that the better the data, the less chance of the ECB pausing on normalization in an effort to support Italy. Lackluster data would ostensibly give Draghi some cover in terms of striking a dovish tone . Without that cover, any nod towards postponing APP wind down would be seen for what it is: an effort to support the Italian bond market, where QE purchases have been (on net) the only source of reliable demand.

Speaking of Italy, the rebound there continued on Thursday as Mattarella attempts to resolve differences with Five Star and League on the way to restoring hopes for a coalition government. There are signs that Salvini might be willing to drop his demand that Paolo Savona be finance minister.

Of course he’s still acting like a fucking asshole about it. “It’s strange to request to move someone from one day to the other because a finance minister isn’t liked by Merkel or the Germans,” he said at a rally in Genoa.

Actually no. It’s not “strange”. It’s entirely in keeping with the way shit works there, and while it’s fine if you don’t like that and if you see that as just more evidence to support your contention that Italy would be better off on its own, that kind of snide rhetoric serves absolutely no purpose other than to whip people into a frenzy.

In any event, Italian equities and financials are trying to bounce, but there’s a lot of ground to make up:


As for Italian bonds, 10Y yields are richer by another 16bps today after Wednesday’s bounce off the panic lows. It’s the same story here – relief, but a long way to go to erase the scars of the past two weeks:


There are still questions about Spain and as Trump would say, “we’ll see what happens”, but for now, Italian lenders and Spanish banks are doing ok and the Stoxx 600 Banks index is making a feeble effort to snap a 6-day losing streak:


It’s a good thing no one is planning on destabilizing this situation on Thursday with a bunch of senseless tariffs…

Leave a Reply to AnonymousCancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

5 thoughts on “In Europe: A Tenuous Calm

  1. tenuous calm is no calm, but rather a tempest gone silent. Could Europe become the famous straw breaking the camel’s back? It could. Italy’s troubles are by no means over, if anything they are only just beginning and so is the fate of the EU in relation to Italy as well as other member countries. Could Europe instability besides making some hedge fund billionaires richer bring the US economy down? It could. I would cautiously suspect economic data from Germany or Europe in general. Wishful thinking and bias reign supreme on both sides of the pond.

  2. In Rome this whole coming month as well as some of May and the people I’m conversing with want OUT of the EU. It is running about 3 to 1 to get out.They are and have been getting in their opinion, sht on too fuking long and want to blame someone, anyone, who brings up immigration, commies, or Merkel/Trump. Confusion to say the least.

    Rome really is burning and the Italian people are pissed.

    1. But the polls constantly show that Italians overwhelmingly want to stay in the Euro. They can’t have it both ways. Just sayin, though I sympathize and understand and Italians’ grievances.

NEWSROOM crewneck & prints