Confidence “Shoots”

Western European indices bounced back mildly today after a substantial sell-off on Monday following the World Bank's downward revision on global growth.  The report reduced the Eurozone's economic outlook for this year to -4.7% from a March prediction of -2.7%.

Mixed signs of economic stability throughout Europe continue, yet recent sentiment data from Germany and France yield an improved picture for forward-looking conditions.  German consumer confidence rose in July for a second month according to a Gfk survey released today. The index rose to 2.9 from a revised 2.6 in June; the uptick comes on the heels of yesterday's report from the IFO that showed German business and investor sentiment improved for a third straight month in June. Business confidence also rose in neighboring France for the third straight month in June, according to the Paris-based statistics office Insee. Yet in contrast to the bullish survey a separate report indicated that French household spending unexpectedly fell 0.2% in May on a monthly basis or -1.6% from the previous year.

As Eurozone's two largest economies, the health of Germany and France will greatly drive the improvement throughout the continent as European countries are highly dependent on the EU as a trading partner.  The Eurozone Purchasing Managers Index out today shows signs of stabilization, yet the numbers are still at a low level (a reading below 50 indicates contraction).  Services PMI declined to 44.5 in June from 44.8 in May, short of economists' expectations of 45.8 and Manufacturing (PMI) rose to 42.4 from 40.7 in May, its highest level since September 2008.

We continue to view Europe's health on an individual country level. CPI for France stood at -0.3% in May on an annual basis, while Germany's came in at the Eurozone average of 0.0%, according to Eurostat. These levels should benefit consumers and increase sentiment, however today's French Services PMI would suggest the opposite as the reading fell to 47.5 from 48.3 in May. We'll be monitoring German unemployment, which actually came in 10 bps to 8.2% on the last reading, to rise sequentially, which we believe should dampen sentiment. We expect modest but improving negative GDP growth in 2H '09 for France and Germany and modest positive growth in 1H '10.

Matthew Hedrick
Analyst


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more