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-- For specific questions on anything Europe, please contact me at to set up a call.


No Current Positions in Europe

Asset Class Performance:

  • Equities:  The STOXX Europe 600 closed up +0.6% week-over-week vs +1.3% last week. Top performers: Cyprus +3.3%; Romania +2.9%; Norway +2.1%; Slovakia +2.0%; Germany +2.0%; Portugal +2.0%; Netherlands +1.3%. Bottom performers: Greece -2.7%; Spain -1.4%; Czech Republic -1.3%; Poland -1.2%.
  • FX:  The EUR/USD is down -0.50% week-over-week vs -3.14% last week.  W/W Divergences: RUB/EUR +1.25%; PLN/EUR +1.20%; CZK/EUR +1.19%; GBP/EUR +0.75%; NOK/EUR +0.71%; SEK/EUR +0.28%; CHF/EUR +0.03%; DDK/EUR -0.01%.
  • Fixed Income:  10YR Yields were mixed to down across the countries we track. Week-over-week, Greece’s 10 YR yield declined -51bps to 25.22%, followed by Spain at -34bps to 6.66%. French and Belgian yields both dropped -19bps to 2.22% and 2.66%, respectively.  Portugal was a notable outlier to the upside, gaining +35bps to 10.56%. Italy was relatively flat on the week, declining -5bps to 5.99%.  

Weekly European Monitor: ESM (and European) “Clarity” Pushed Out - aaa. yields


ESM (and European) “Clarity” Pushed Out:

I encourage you to read Friday’s Early Look titled “Crumble Cake Europe” in which I step back to assess the Eurozone’s political landscape in the context of the on-going “crisis”, including the implications for the common currency. In short, given the German Constitutional Court’s lack of decision on the ESM and fiscal compact this week—and a follow-up statement from Finance Minister Wolfgang Schaeuble that a decision may not come until the Fall—there’s potentially a long runway of indecision on the bailout facility and the lack of scheduled Summits (i.e. catalyst) over the summer leaves a lot of uncertainty on the table, including Spain’s bank bailout that hangs on both the EFSF and ESM (which was scheduled to be operation on July 1) and the firepower behind the Eurozone’s bailout facility, as the EFSF has only €120-220B remaining, depending if you factor in Spain’s bank bailout or not.

As we show in the chart below, the EUR/USD cross broke our intermediate term TREND Line of $1.22 this week and is nearing 2010 lows, back when Greece received its first bailout in May.  We see the cross as a relative loser until more decisive action is taken from Eurocrats.

Weekly European Monitor: ESM (and European) “Clarity” Pushed Out - aaa. EUR

Call Outs:

Spain - PM Rajoy announced budget measures worth €65B over 2.5 years this morning (VAT will rise to 21% vs 18%).  He also announced a reduction in unemployment benefits, the elimination of the year-end bonus for some public workers, the consolidation of local governments and the scrapping of a tax rebate for home buyers. Rajoy also said that he may privatize airport, railway and port assets.

Germany - The country’s Constitutional Court ended its hearing on the ESM and fiscal pact and did not give a date for a ruling, but Finance Minister Wolfgang Schaeuble says he hopes it will come before the fall. 

Norway - The Norwegian government stepped in at the last minute to force arbitration and avert a lockout of ~ 6,500 offshore oil workers. 

Eurozone - Finance Ministers announced further details around the €100 billion plan to recap Spanish banks.  Under terms of the “political understanding” - €30 billion will be released by the end of the month via Spain’s existing FROB (on Spain’s balance sheet). 

European Commission - Will propose easing Madrid's deficit goal for this year to 6.3% of economic output (versus a previous target of 5.3%), and 4.5% in 2013 (versus 3%) and 2.8% for 2014.

Greece - Deposits in Greece’s banking system have increased by more than €8 billion since the government formed.

Italy - Prime Minister Monti ruled out running for office when his term ends next fall. He also reiterated that Italy may want to tap the Eurozone bailout mechanism to help lower its borrowing costs.

Ireland - The Financial Times, citing an interview with Irish Finance Minister Michael Noonan, reported that Dublin will unveil a multi-billion euro stimulus package later this month in an effort to boost its economy and reduce unemployment.

ECB - ECB on Thursday showed that banks held €324.9B in the ECB's overnight facility on Wednesday, the first day that the central bank's recently announced zero deposit rate went into effect, down from €808.5B on Tuesday.

Italy - Moody’s downgraded Italy's government bond rating to Baa2 from A3.

France - European Affairs Minister Bernard Cazeneuve said that France is ready to cede sovereignty to its European partners if it helps to bolster the tolerance for debt mutualization.

Risk Monitor:

The move in sovereign CDS was mixed on the week. Portugal fell -18bps to 835bps week-over-week, followed by Germany at -13bps to 87, France -12bps to 173bps, and Italy -9bps to 505bps.  Ireland rose 18bps to 551bps and Spain was flat on the week. 

Weekly European Monitor: ESM (and European) “Clarity” Pushed Out - aaa. cds   a

Weekly European Monitor: ESM (and European) “Clarity” Pushed Out - aaa. cds   b

Data Dump:

Eurozone Sentix Investor Confidence -29.6 JUL vs -28.9 JUN

Eurozone Industrial Production -2.8% MAY Y/Y (exp. -3.2%) vs -2.4% APR   [0.6% MAY M/M (exp. 0.0%) vs -1.1% APR]

Germany Exports 3.9% MAY M/M (exp. 0.2%) vs -1.7% APR

Germany Imports 6.3% MAY M/M (exp. 0.8%) vs -4.9% APR

Germany CPI 2.0% JUN Final [unch vs previous estimate]

Germany Wholesale Price Index 1.1% JUN Y/Y vs 1.7% MAY

France Bank of France Business Sentiment 91 JUN vs 92 MAY

France Industrial Production -3.5% MAY Y/Y (exp. -1.6%) vs 0.8% APR   [-1.9% MAY M/M (exp. -1.0%) vs 1.4% APR]

France CPI 2.3% JUN Y/Y vs 2.3% MAY


UK Industrial Production -1.6% MAY Y/Y (exp. -2.1%) vs -2.0% APR

UK Manufacturing Production -1.7% MAY Y/Y (exp. -1.9%) vs -1.5% APR   [1.2% MAY M/M (exp. -0.1%) vs -0.8% APR]

Italy Industrial Production -6.9% MAY Y/Y (exp -8.6%) vs -9.3% APR   [0.8% MAY M/M (exp. -0.6%) vs -2% APR]


Spain House Transactions -11.6% MAY Y/Y vs -9.9% APR


Portugal CPI 2.7% JUN Y/Y vs 2.7% MAY

Switzerland Unemployment Rate 2.9% JUN vs 2.9% MAY

Switzerland Producer and Import Prices -2.2% JUN Y/Y (exp. -2.2%) vs -2.3% MAY

Norway CPI 0.5% JUN Y/Y (exp. 0.8%) vs 0.5% MAY

Denmark CPI 2.2% JUN Y/Y vs 2.1% MAY

Finland CPI 2.8% JUN Y/Y vs 3.1% MAY

Finland Industrial Production -1.7% MAY Y/Y vs -2.8% APR   [1.2% M/M MAY vs 0.6% APR]


Netherlands Retail Sales 1.6% MAY Y/Y vs -8.7% APR

Netherlands Industrial Production -0.5% MAY Y/Y (exp. -0.5%) vs 0.4% APR  [-0.3% MAY M/M (exp. -0.5%) vs -2.5% APR]

Sweden Industrial Production -2.3% MAY Y/Y (exp. -6.9%) vs -6.4% APR  [ 3.5% MAY M/M (exp. 0.4%) vs -0.2% APR]

Sweden CPI 1.0% JUN Y/Y vs 1.0% MAY

Greece Industrial Production -2.9% MAY Y/Y vs -2.2% APR

Greece CPI 1.0% JUN Y/Y (exp. 0.8%) vs 0.9% MAY

Greece Unemployment Rate 22.5% APR vs 21.9% MAR

Ireland 1Q GDP 1.2% Y/Y vs 2.8% in Q4

Ireland CPI 1.9% JUN Y/Y vs 1.9% MAY

Czech Republic CPI 3.5% JUN Y/Y vs 3.2% MAY

Czech Republic Unemployment Rate 8.1% JUN vs 8.2% MAY

Czech Republic Construction Output -3.5% MAY Y/Y vs -2.7% APR

Czech Republic Industrial Output -2.4% MAY Y/Y (exp. -2.3%) vs 2.2% APR


Turkey Industrial Production WDA 5.9% MAY Y/Y vs 4.2% APR

Latvia Unemployment Rate 11.9% JUN vs 12.3% MAY

Slovakia CPI 3.6% JUN Y/Y vs 3.4% MAY

Hungary Industrial Production 1.9% MAY Y/Y vs -3.1% APR

Interest Rate Decisions:

(7/12) Serbia Repo Rate HIKE 25bps to 10.25%

(7/12) Latvia Refinancing Rate CUT 50bps to 3.00%

(7/13) Russia Overnight Deposit Rate UNCH at 4.00%

(7/13) Russia Overnight Auction-Based Repo UNCH at 5.25%

(7/13) Russia Refinancing Rate UNCH at 8.00%

The Week Ahead:


Monday: Jun. Eurozone CPI; May Eurozone Trade Balance; May Italy Trade Balance, General Government Debt

Tuesday: Jul. Eurozone ZEW Survey Economic Sentiment; Jun. Eurozone New Car Registrations; Jul. Germany ZEW Survey Current Situation and Economic Sentiment; Jun. UK CPI, Retail Price Index; May UK ONS House Price; May Spain Trade Balance

Wednesday: May Eurozone Construction Output; UK BoE Minutes; Jun. UK Claimant Count Rate, Jobless Claims Change; May UK Average Weekly Earnings, ILO Unemployment Rate, Employment Change; 2Q Spain House Price Index; Italy Chamber of Deputies Votes to Approve ESM, Fiscal Pact; May Italy Current Account

Thursday: ECB Governing Council Meeting; May Eurozone Current Account; Jun. UK Retail Sales; May Italy Industrial Orders, Industrial Sales

Friday: Jun. Germany Producer Prices; Jun. UK Public Finances, Public Sector Net Borrowing; May UK Current Account

Extended Calendar Call-Outs:

19 July: ECB governing council meeting


18-19 October: Summit of EU Leaders

Matthew Hedrick

Senior Analyst