Let’s break it down into parts. On the one hand we see the most important macro data and the situation in Europe and Germany. On the other hand, we analyze the stock market.
The economic data is ba
Business surveys are more positive in the US than in Europe or the UK. In other words, Europe will see a sharp drop in activity in the coming quarters, just when energy prices could rise more sharply
This is how the PMIs are developing in Europe, both in the service sector and in the manufacturing sector. Europe is not coming back and Germany is pulling the car this time, but down.
Germany’s famous trade surplus fell 15%m/m to 15.9 billion euros in July as exports fell 0.9%m/m while imports rose 1.5%m/m. The value of exports to China has been weak, falling 16.7% year-to-date to €57.7 billion.
Export growth is still coming from the US BUT the Inflation Reduction Act or that The US chip law could pose a threat to German exports. Many capacities are relocated from Germany to the USA. Germany is no longer the innovation factory of the last 50 years. In general, Europe lags behind when it comes to new technologies and growth stocks.
And a fact we haven’t seen in a long time: the unemployment rate has risen to 5.8%, the highest level since May 2021. We are almost approaching a Covid level
The German government deficit increased by 42 billion in the first half of 2023 as revenue increased by 3.5% and expenditure by 7.7% compared to the first half of 2022. Italy is also lagging behind France, which already owes 3 billion euros, but that will eventually stop and the German and Dutch ‘hawks’ will say the ‘party’ is over if they want to go into debt, not to fund spending, but to finance investments at the rates set by the market.
I’m not sure when that will happen, but without the ECB behind the buybacks and liquidity programs, this is certainly a real mountain climb for the most heavily indebted economies.
Germany, which has erratic energy policies due to its utter dependence on Russian gas, must increase its debt to pay for investments and welfare.
Check out the 10 largest European companies. Authentic “titans” in the Eurostoxx 600 stock market. There is only one German company (SAP), the rest are French, Swiss, Dutch, Danish and English. That said, Germany has already lost the brat that was its big industries, and the market is giving more priority to the tech, biotech, and service sectors, not so much the industrial sector.
Sell anti-obesity medicines and handbags to the Chinese. Great investment ideas, within a year they have almost doubled their size in the stock market.
And this is maybe one of them The most frightening diagrams that exist for the German economy. German car companies are suffering on the stock exchange compared to Tesla.
The Germans taught the Chinese to build cars, and now there are good electric car manufacturers in China (which Germany, along with the rest of Europe, has made fashionable by turning against the internal combustion car) because it turns out that the sector, which provided it with 15% of its exports, is in a complete transition, with a lot of competition and without being able to access the raw materials they need to manufacture electric batteries.
All nonsense for one Sector that was the great world reference and that it was one of the great economic engines driving the economy could never have been better said.
I told you last week that the economy and stock market curves are approaching and that you should prepare your portfolios. In the not too distant future, states will need to start adjusting and that will move markets.
Of course, the ability to borrow that we, the countries of the South, have will not be maintained and fiscal rules will become stricter in the coming years.
