Oil has hit a 15-month high on the back of optimism over the Opec deal which needs to be sorted out by November 30. But, with a record long position building across the combined benchmarks, a disappointment could leave some exposed. Full report to come within the hour....
Article / 01 June 2016 at 9:52 GMT

Euro area economy may be ready to turn around

Head of Equity Strategy / Saxo Bank
  • Real-time €-coin GDP tracker points to turnaround
  • Euro area presently led by services, mining, oil & gas
  • Financials, carmakers, leisure firms remain under pressure

European transport sector
The euro area recovery may well be around the corner, with the transportation, 
energy, and service sectors showing particular strength. Photo: iStock 

By Peter Garnry

In client meetings and presentations, I always talk about not reinventing the “macro-wheel”, so here at Saxo we are tracking the €-coin* real-time GDP tracker published by the Bank of Italy and released the first business day after the month tracked. 

Today we received the latest figure for May showing a further decline to 0.26 (from 0.28 in April). The decline was driven largely by a slowdown in industry and persistent weakness in the economy’s price level. 

Based on the €-coin indicator, the euro area economy is growing at around 1% (annualised). The good thing about today’s figure, however, is that the loss of momentum is slowing down, so the probability has increased that June may be the turning point, leaving May as the short-term bottom in the recent slowdown that started in February.

To no one's surprise, the slowdown in the euro area economy has negatively impacted cyclical industry groups such technology hardware, diversified financials, automobiles, banks, and also leisure/recreational companies (due largely to terrorism). 

Interestingly enough, however, another part of the cyclical economy has actually performed the best and those industry groups are mining, steel, transportation, oil & gas, and electrical equipment manufacturing.

While the industrial sector is still slowing down, the service sector is holding up well driving down the unemployment rate across most euro area economies. The turn in June could come from a positive impulse into the industrial sector from the massive stimulus being put into place right now across Asia (China and Japan). 

Recent developments in commodity prices could also have a positive impulse through the establishment of a higher price level in the economy. 

Other leading indicators from the US and Asia are also showing a likely bottom and some recent data points have actually accelerated, so unless we get any disruptions from events (Brexit etc.), it is our forecast that the economy will accelerate somewhat into the summer months.
Matera, Italy
The European recovery has taken its time, but recent 
signs point to a local bottom. Photo: iStock 
* €-coin collates a large collection of statistical data (industrial production, business surveys, stock market and financial data, demand indicators, and more) and extracts the information that is relevant to forecast GDP

— Edited by Michael McKenna

Peter Garnry is head of equity strategy at Saxo Bank


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

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