Ole Hansen
Saxo Bank’s head of commodity strategy Ole Hansen considers the implications of pledges by Saudi Arabia and Russia to raise oil production despite the likes of Iran and Venezuela not backing the move.
Article / 30 May 2016 at 5:17 GMT

3 Numbers: Eurozone business and consumer sentiment edges higher

Blogger / MoreLiver's Daily
  • Germany's Wolfgang Schaeuble will speak on sustainable public finances
  • His hardline fiscal policy views will make his speech worth watching
  • Europe's economic sentiment indicators for May remain high
  • Germany's inflation rate is edging slightly higher, but still close to zero

By Juhani Huopainen

Today’s trading day will be seriously hampered by holidays in the UK and US. Despite the holidays, the rest of the world is open and today’s calendar is interesting.

Last night’s speech by Federal Reserve Bank of St Louis president James Bullard, the second-guessing of the Fed’s coming interest rate hikes, and the Bank of Japan’s next move will be the main themes this week, as not much is expected from this week’s meeting of the European Central Bank.

German Finance Minister speaks (0900 GMT). Germany’s finance minister Wolfgang Schaeuble will be speaking at a conference in Berlin on sustainable public finances.  Ifo Institute president Clemens Fuest will be taking part as well.

Schaeuble is well-known for his hardline views on fiscal and monetary policy. This is inconvenient for the Eurozone’s attempts to reflate and get the growth going, as monetary policy at the zero negative rates forces central banks to resort to unconventional policies like negative rates and asset purchases.

Asset purchases are by definition risk and debt mutualisation. Schaeuble’s view is that such measures inhibit reforms and austerity and are an invitation to ignore national budget deficits.
This creates a Catch-22 situation for Europe. If fiscal and monetary policy are bad and prohibited, and austerity is dead on a theoretical and practical level, only “reforms” are left as viable policy options.

Such measures are politically very difficult to implement, and usually a crisis is required before they are brought in. I am not sure what Schaeuble believes in doing, but due to his vast influence in German politics and Germany’s influence in Europe, this speech is worth watching.

Euro area May Business and Consumer Survey (0900 GMT). Euro area’s Economic Sentiment Index is expected to have risen to 104.5 in May – a clear improvement from 103.9 in April. If the consensus forecast is right, it would be the second consecutive rising month since the weak start of the year.

ESI long
Chart source: Saxo Bank

The first quarter’s gross domestic production growth rate in Europe was surprisingly strong, and the second quarter’s growth rate is widely expected to be slower.

It does sound like a contradiction, but perhaps the globally weak first quarter was overcome by higher public spending due to the migrant crisis. Now that several risk factors from Greece to the global outlook are on the decline, economic sentiment is improving.


Chart source: Saxo Bank

Looking at the country-specific data, Italy’s index jumped in April, while Spain and France have been disappointing in the past few months.

Dolce vita: Consumer and business sentiment is up in Italy and most of the rest of Europe. Photo: iStock

Spain is hurt by difficulties in forming a functioning government. Meanwhile France has a government that has recently learned to function, but it faces strong opposition to planned labour reforms.

ESI countries
Source: Saxo Bank

Without Italy’s jump, the euro area sentiment index would not have improved notably.

If the jump is not sustained, the overall outlook for the Eurozone would probably fall back in line with what the Markit’s Purchasing Manager Index is suggesting.

The May flash composite PMI fell to a 16-month low, and while it remained well above the zero-growth 50-line at 52.9. The data can be viewed and downloaded here.

Germany May Flash Consumer Price Index (1200 GMT). After falling for two months, the consumer price index is expected to have increased 0.3% from a month ago. That would increase the CPI’s annual change to 0.1% from the previous month’s -0.1%.

German CPI
Source: Saxo Bank

The EU-harmonised index of consumer prices (HICP) is similarly expected to show a slight improvement, as the year-over-year change is expected to climb from the April’s negative 0.3%  to -0.1%.

The improvement in headline inflation is immaterial, as oil prices have rallied since mid-February, but this has not managed to increase headline inflation.

Of course, the higher oil price is inflationary. Its effect comes after a delay rather than immediately. But note how the inflation rate was already trending lower before oil prices collapsed. I assume that even with a rising oil price, inflation will remain subdued.

The euro area flash inflation report for May and the M3 monetary aggregate and lending data for April will be published tomorrow – and the European Central Bank’s policy meeting concludes on Thursday.

-- Edited by Adam Courtenay

Juhani Huopainen is a blogger and a macro analyst at More Liver’s Daily. If you would like an email notice each time Max posts a trade, then click here to follow him.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail