- The Eurostoxx 50 is currently priced for negative medium-term returns, based on book value.
- Margins are a wild card for EZ equities, but unless they remain near record highs, prices will fall further.
- We look for a further 5-to-10% decline in EZ equities as margins compress and earnings growth slows.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Italy’s new wealth tax on foreign income will help public finances but won’t balance the books…
- ...Spending needs to come down, and significantly, to get Italy away from a near 6% deficit this year.
- As expected, the SNB intervened to stem the rise in the franc last week; more CHF sales will be needed.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Inflation will drop back sharply this month.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Swiss industry likely had another tough quarter in Q2 and services turnover data to May disappoint.
- We doubt GDP fell, however, as implied by the PMI; it has underestimated growth since Q4 2022.
- We have pencilled in zero growth in Switzerland in Q2, after a 0.3% quarter-on-quarter increase in Q1.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Recessionary, but what’s happening in consumption?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German manufacturing output rebounded modestly in June, but likely fell back in July.
- Hard data are now consistent with the reported GDP decline in Q2, but what happened to consumption?
- We’re nudging down our Q3 GDP growth forecast in Germany by 0.1pp to 0.2% quarter-on-quarter.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Relief, but it will be short-lived.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Sales fell, but German data are missing again.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The ECB will provide liquidity via LTROs before resorting to an emergency rate cut.
- We now think the ECB will cut by 25bp in September and October, but not in December.
- Markets now agree with our SNB call, so we’re sticking to our guns for two more cuts this year.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- House prices in Spain are currently higher than during the house price bubble in 2005-to-2008…
- ...But the current increase doesn’t look unsustainable and household finances are sound.
- We see little scope for a sharp correction in house prices in the coming quarters in Spain.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still suggesting private sector activity stalled at the start of Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Rising in June, as in France and Italy.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A relief, but production likely fell back in July.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Stubborn domestic inflation means headline held steady.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: We think the manufacturing PMI is too downbeat, even after the upward revision.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Blame Italy for the upside surprise.
Claus Vistesen (Chief Eurozone Economist)Eurozone
