In one line: Revisions in healthcare lifts CPI inflation from initial estimate.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Political uncertainty is soaring in Europe, but EZ equities have never felt better; what’s up?
- We think markets are betting on another Hamiltonian moment in Europe, this time on defence policy.
- Europe will rise to the challenges it faces, but have markets bought into the hype too strongly?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- US reciprocal tariffs, ex-VAT inclusion, would raise tariffs for 26% of EZ exports to the US…
- ...But these account for just 4% of total EU exports to the US, so the hit to EZ GDP would be small still.
- Swiss GDP growth picked up in Q4, as we expected and despite soft surveys.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still no signs of much tariff front running by US firms.
Melanie Debono (Senior Eurozone Economist)Eurozone
- A peace deal or ceasefire in Ukraine is unlikely to drive near-term relief in Eurozone energy prices.
- The EZ GDP growth slowdown in Q4 was smaller than previously thought...
- ...And EZ productivity growth picked up; or did it? Our ECB call is unchanged either way.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Soft in CPI, but the core HICP is sticky, and selling prices are rebounding.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Swiss inflation fell in January, and has been within the SNB’s target range for 20 straight months.
- The decline, and a further probable fall in February, solidifies the need for another rate cut.
- March’s cut will likely be the last in the current easing cycle, as inflation rises above SNB estimates in H2.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Only around 40% of EU Resilience & Recovery Facility cash has been disbursed to member states.
- Bureaucracy, rising costs and supply-chain issues are holding back the pace of fund absorption.
- A lot needs to be done by August 2026 to mobilise remaining funds; not everyone will get there.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Bunds have hovered close to fair value since the beginning of the year, according to our models.
- US Treasuries and Schatz point to upside risks to Bund yields, but fundamentals pull the other way.
- Near-term risks to Bund yields are tilted to the downside, before bear-steepening in H2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Decent, but also behind the Trump-curve.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- US tariffs on steel and aluminium would have only a minimal direct impact on EZ exports and GDP…
- …But the constant threat of tariffs is raising uncertainty for firms, adding to downside risks for capex.
- The CDU/CSU remains in pole position in Germany, but it is ceding ground to the AFD.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Snapping back, but strength unlikely to continue.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Output stung by falling auto production; exports finish 2024 on a strong note.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Attempts by the ECB to persuade markets to give up focusing on the neutral rate are laudable, but futile.
- The ECB’s own forecasts suggest that the policy rate should stabilise at neutral, wherever that is.
- EZ industrial production fell sharply in December, but we look for a solid rebound in January.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Retail sales still rose in Q4, and further increases are likely.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still pointing to underlying weakness in construction.
Melanie Debono (Senior Eurozone Economist)Eurozone
