European Manufacturing PMI Declines for “Biggies” in Europe

Hedgeye Portfolio: Long Germany (EWG), Long British Pound (FXB), bullish on EUR-USD; Short Italy (EWI)


The final September figures for European Manufacturing PMI came out today – in aggregate there is a noticeable downturn in the September figures for the major economies (excluding France), in line with our forecast for weaker European economic data in the back half of 2010. We’ll note that the PMI figures in the tables below do not all come from the same sources, although most do, including the big three Eurozone economies of Germany, France, and Italy, which are issued from Markit/Reuters.  That said, our focus is on the changes in the data on the margin, in particular the month-over-month moves. One highlight here is Scandinavia, which continues to outperform, mirrored by its equity market that is up +14.1% YTD and a growth forecast of 3.6% Y/Y this year (Bloomberg), the highest versus its major European peers. 


To be clear, our position on Europe remains that we see a clear divergence among countries, similar to our Sovereign Debt Dichotomy theme in 2Q10. Currently we are bullish on Germany and continue to warn of further deterioration in the capital markets of countries like Portugal, Ireland, Italy, Greece, and Spain. One TRADE that has worked for us is long EUR, short USD, despite the ongoing sovereign debt contagion threats across the Eurozone. With the Euro rising to $1.37 today, it’s bumping up against our overbought TRADE (3 weeks or less) line of resistance at $1.38, which we’ll be watching acutely. The TRADE line of support remains at $1.34.


Matthew Hedrick



European Manufacturing PMI Declines for “Biggies” in Europe - manu

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