Long-term inflation expectations in Germany have barely moved despite the recent escalation in the Middle East.
The 10y breakeven inflation rate, a common market measure of expected inflation over the next decade, only nudged to 1.91%; still below the 2% threshold and well under the roughly 3% levels seen after Russia invaded Ukraine. This suggests that markets do not currently expect the conflict to have lasting inflationary effects. Source: Bloomberg, HolgerZ
Europe is the energy sucker.
Chart shows SX5E vs oil (inverted). This does not mean SX5E must crash to close the gap, but it shows you clearly just how vulnerable Europe is. Source: The Market Ear
Christine Lagarde is expected to leave the ECB before her term ends in 2027, aiming to give Emmanuel Macron and Friedrich Merz the opportunity to choose her successor.
With the French presidential election approaching, Lagarde may step down early to let Macron and Merz influence her ECB successor. Key stakes: filling the power vacuum, deciding among top contenders like Hernández de Cos, Knot, Schnabel, and Nagel, and shaping the ECB’s post-crisis legacy.
In Germany, the value of the country’s gold reserves has climbed to €496bn.
Germany holds 3,352 tonnes of gold through the Bundesbank. More than 1,200 tonnes are stored in New York, with the rest held in Frankfurt and London. Source: HolgerZ, Bloomberg
ECB President Christine Lagarde: "Europe is going to do a big SWOT analysis and decide what do we need to do to be strong by ourselves."
Source chart : FT Source image: Reuters
Excellent comments by German Chancellor Friedrich Merz in Davos today
Europeans have damaged their economies. They must fix it.
In case you missed it…
"German manufacturing orders for November surprised sharply to the upside, with the year-on-year figure rising +10.5%, versus expectations of +2.9%. Outside of the post-Covid rebound, this marks the strongest increase in almost 15 years. The data were boosted by large orders linked to government rearmament plans, but even stripping out such lumpy items, there has been a clear and gradual improvement in underlying momentum over recent months“ (Jim Reid, Deutsche Bank) Source: DB through Daniel D. Eckert @Tiefseher on X
In Germany, cold weather is rapidly draining gas storage.
Facilities are now only 52% full – the lowest level for this time of year since at least 2020, and even lower than in 2022, the year Russia launched its war against Ukraine. Source: HolgerZ, Bloomberg
