Europe: Today’s Data Call-Outs

Below we provide brief commentary on today’s European data releases:




Ireland stress tests reveal that four banks need to raise €24 Billion in additional capital vs expectation of €27.5 Billion.

  • Hedgeye: Confidence in Irish banks is at rock bottom: the very need of the country to issue numerous stress tests confirms this point. Pumping in another €24 Billion on top of the €46 Billion injected in the industry over the last two years may ease market concerns in the near term, however the banks have a long road ahead from a financial and credibility perspective. While the government has pledged to provide the money, if the banks fail to raise it themselves, expect taxpayer unrest to grow as they are inflicted with more and more banking sector debt.  All the while, sovereign debt concerns continue to heighten. While there is a new coalition in power in Ireland, the track record of politicians underestimating the severity of the fiscal and economic conditions is causing some skepticism on the street. Tellingly, private sector deposits at Irish banks dropped at an annual rate of 9.8% in February, according to the Central Bank.

The breakdown of capital needs to cope with potential losses include:


AIB   €13.3bn

Bank of Ireland   €5.2bn

EBS   €1.5bn

Irish Life & Permanent   €4bn



Portugal’s debt (as a % of GDP)   8.6% in 2010 vs government expectations of 7.0-7.3%

  • Hedgeye: Portugal continues to shake and break, confirmed by government bond yields hitting all-time highs over German bund, after the resignation of its PM, Jose Socrates, last week following parliament’s rejection of additional austerity measures. Reducing the country’s deficit is a major focus of the country and market participants – the 2010 miss only heightens the probably that the country asks the EU (and perhaps IMF) for a bailout. S&P also downgraded Portuguese banks today following sovereign credit reductions from multiple agencies in the last weeks.

Eurozone CPI   2.6% MAR Y/Y vs 2.4% FEB

  • Hedgeye: Inflation ticket up again sequentially, increasing the probability that ECB President Trichet raises the benchmark interest rate next month. Our only pause is that given continued unrest in MENA and uncertainty in Japan the ECB may push out a rate hike to better assess the macro environment.

Turkey Q4 GDP   9.2% Y/Y vs 5.2%       [3.6% Q/Q vs 1.2%] 

  • Hedgeye: Growth continues to impress for a country that is often lumped in with the BRICs due to its emerging growth profile. While inflation remains an issue (4.2% FEB Y/Y), its equity has seen strong performance in the face of our call for there to be market headwinds from the unrest in MENA as Turkey imports ~ 93% of its oil and ~ 97% of natural gas, primarily from MENA countries.  To the contrary, the Turkish equity index (ISE National 100) is up 9.8% March-to-date and the eft TUR is up 14.7% over the same period! 

UK Nationwide House Prices   0.1% MAR Y/Y   vs -0.1% FEB   [0.5% MAR M/M   vs 0.7% FEB]

  • Hedgeye: Since hitting a peak in April 2010, the rate of price growth according to Nationwide’s House Prices survey has slowed every month since to a near term bottom in January 2011. Today’s March data point, albeit modest, is confirming an improving trend over the last three month. We’re not bullish on the country’s housing recovery or its economic performance versus Europe’s fiscally stronger nations (Germany, Sweden, and Poland). We are however bullish on the GBP-USD and the country’s credit market as Cameron and Co. promote credibility through austerity and give attention to cutting the country’s debt and deficit imbalances.


In Line:


Germany Retail Sales   1.1% FEB Y/Y   vs 2.6% JAN   [-0.3% FEB M/M   vs 0.4%]


Germany Unemployment Rate  7.1% MAR vs 7.3% FEB

  • Hedgeye: The unemployment picture in Germany has continued  to impress over the last 18 months.  Today’s print is further confirmation that the country properly managed the downturn through promotion of part-time labor and is now ramping up hiring coincident to stronger global demand. The unemployment change for March was -55K MAR to 3.01 Million (the lowest level since June 1992), beating expectations of -25K.

-Anecdotally, Volkswagen recently said it plans to create 50K new jobs, 6K of which in Germany. Robert Bosch (world’s biggest auto-parts maker) said it will add 9K graduates this year, 1.2K in Germany.


France Producer Prices   6.3% FEB Y/Y vs 5.6%      [0.8% FEB M/M   vs 0.9% JAN]


Spain Total Housing Permits   -15% JAN M/M vs -0.4% DEC    [4.0% JAN Y/Y   vs -6.3%]


Italy PPI   5.7% FEB Y/Y vs 5.3% MAR        [0.6% FEB M/M   vs 1.2%]


Italy CPI   2.6% MAR P Y/Y vs 2.1% FEB


Greece Retail Sales   -10.5% JAN Y/Y  vs -13.5% DEC



Matthew Hedrick


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