Ian Reynolds
The death of the EU and the Euro has been predicted many times but finally we are seeing this playing out and it's happening exactly where no-one thought it would. Germany and France.
Having spent 25 years hiding behind the US and NATO, Europe has nothing left. No manufacturing base, no innovation, no defence and no energy.
Great Britain gave them the heads up but as usual it degenerated into a fight. Forging alliances with the City of London would have been the sensible thing to do post Brexit.
Now political and economic fracturing is occurring in real-time.
Breaking
US Treasury Flags Risks From New Cross-Border Payments Systems [Bloomberg]
Zelensky: I’ll give up Ukrainian territory to Russia to achieve peace
Trump’s Tariff Threat to Top Trading Partners Roils Markets [Bloomberg]
Far-right candidate takes shock lead in Romania presidential election [BBC]
The World’s Biggest Debtor Gets a New Manager: Scott Bessent [Bloomberg]
Trump Tariff Threat ‘Chilling Signal’ for Mexico Economy [Bloomberg]
Russian central bank intervenes as rouble tumbles past 110 to the dollar [Reuters]
RBNZ cuts rates 50bps to 4.25pc [RBNZ]
Denmark Hit By 'Whole Country' Mobile Outage, Trains Halted [Zerohedge]
In Focus
Europe
EU Consumer Confidence November 2024
Germany CPI November 2024
Germany Retail Sales October 2024
EU CPI November 2024
For VW, Audi, BMW, Mercedes-Benz, a profits slump is completely expected as the car manufacturing sector has, like in Japan, been smashed by a global move away from globalisation, working from home and a slow take-up of electric vehicle manufacturing.
Fortune's analysis found that German companies in the Fortune 500 Europe have announced plans to lay off over 60,000 workers, the majority of whom come from the country's manufacturing sector. The figures rely on reported announcements this year and could be higher.
Thyssenkrupp to cut 11,000 jobs at steel division in major corporate shakeup [Reuters]
Politically Europe is fracturing and when Greek bonds yield less than French bonds and Poland has higher GDP than Germany then a big change is coming.
Germany's far-right AfD to campaign to leave EU, euro and Paris deal
Buy American to avoid Trump trade war, says Christine Lagarde [FT]
Incredibly it's Germany that is the sick man of Europe with high wage rises, stubborn CPI inflation, low growth and an immigration policy problem. Markets are pricing in rate cuts but also political risk in Germany and France.
German Wages Rose by Most in Three Decades in Third Quarter [Bloomberg]
French markets hit by threat of government collapse [FT]
Trump's threats of a trade war have seen China and Mexico push back on him but in Europe there is too much fear to do such a thing with Ms Lagarde saying buy USD with your Euros !
In fact the Euro has been in a secular decline since the GFC and now we're reaching levels when something has to break. EUR / USD closed the week at 1.0575 with strong support at 1.0450, 0.9550 and 0.8450 and resistance from the downtrend at 1.1300.
If Europe is going to obey Ms Lagarde and buy USD with their Euros then we could see a big drop in price, especially if 0.8450 breaks.
EUR / USD Monthly
Gold
Gold / USD Daily
Gold's had a massive run higher this year with the main buyers central banks and Chinese citizens. The western world has had no interest.
A pull-back may be starting with the lower low structure on the daily charts, with Bitcoin sucking in some of the buyers from those that bought gold for Bitcoin at the beginning of the year.
The World’s Biggest Buyers of Gold Are Now Among East European Central Banks [Yahoo! Finance]
Chinese Central Bank Just Secretly Bought 60 Tonnes of Gold [Money Metals]
Is The US Considering A Gold-Backed Treasury Instrument? [Zerohedge]
Bitcoin
BTC / USD Monthly
With all the fanfare, Bitcoin still needs to close above the previous cycle's high and assuming it does, then a big blowout to 135,000 / 140,000 is possible but probably not until 2025. Definitely wrong below 50,000 and price could certainly retrace to 75,000 before breaking much higher.
There's a lot of press around who's buying but rest assured almost everyone is stilll on the sidelines.
Should pension funds be allowed to invest in cryptocurrency? [The Times]
UK to Trial Sales of Blockchain-Based Gilts Within Two Years [Yahoo ! Finanace]
Hong Kong Gives the Super-Rich a Break, No More Crypto Tax [CCN]
China
With the US economy still the strongest in the world by a long way and China's in disinflation / deflation there is only going to be one winner.
Tariffs may be just the start of U.S.-China disputes in a second Trump term [NBC]
China's economy is in mild deflation, with the whole-economy price level falling for six consecutive quarters by an average 0.8%. Consumer prices rose by just 0.3% in the year to September; and 40% of items in the consumer price basket are declining annually.
Deflation in China Risks Becoming Entrenched - Fitch Ratings [Fitch]
USD / Offshore YUAN Monthly
The Yuan is pegged to the USD and the People Bank of China fixes the rate daily. With sanctions in place Americans buying Chinese made goods would have to pay higher prices and normally it doesn't last too long before someone else (maybe internally) makes those goods at a lower price.
That peg will have to break.
JPMorgan Sees 10-15% Chinese Yuan Slide in Response to Trade War [Bloomberg]
China’s Property Slump May Extend Into 2025, Fitch Says [Bloomberg]
Japan
Bank of Japan Core CPI YoY
Japan Tokyo CPI November 2024
Japan Construction Orders October 2024
More car manufacturers collapsing, this time in Japan.
Toyota’s Sales, Output Plateau as Slump Persists in Japan, China [ Bloomberg]
Nissan on the brink of collapse after slow US and Japan sales [Sky News]
Nissan seeks anchor investor to help it through make-or-break 12 months [FT]
US
US New Home Sales October 2024
US Core PCE Prices Q3 2024
US GDP Q3 2024
US Core PCE October 2024
We continue to see mixed narratives in the US economy. Especially in housing where some cities are strong and some very weak. What can you expect when the US Govt prints trillions of dollars out of thin air and gives it away to buy voters. Even giving it away internationally eventuates in it returning to the US. All this creates even more wealth division and building of bubbles.
A great example happened this week when US money supply increased by over 2 trillion dollars in one month;
U.S. M2 Money Supply
So fiscal policy is unhinged but what about monetary policy,
Financial conditions are now even easier than previous records seen in late 2020 and 2021. In fact, this makes financial conditions easier than when the FED cut rates to near 0% overnight in 2020.
Meanwhile, the market is pricing in a 59% chance of another 25 bps Fed rate cut on December 18.
All while Core CPI inflation is back on the rise and has been above 3% for 43 straight months.
And loose monetary policies build bubbles and bubbles have outcomes.
US credit card interest rates are over 22%. And credit card interest rates are a function of default rates. Everyone's been expecting a recession as jobs get cut and workers laid off along with delinquencies in auto loans at all time highs.
All those freshly created dollars are keeping the lights on and that can further down the road.
All that ends on January 1 when the debt ceiling is back in place and at the current debt at that date.
Credit card interest rates in US
It’s Reasonable to Consider Rate Cut Next Month, Fed’s Kashkari Says [Bloomberg]
US regulators approve first round-the-clock stock exchange [FT]
In The Background
CRE / Banks / CLOs
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Chicago PMI November 2024
Cities are struggling world-wide and municipalites struggling with too much debt, and the lenient accounting standards for such entities, allows that debt to be hidden. Take a look at any city balance sheet.
Banks face growing risk as double defaults on commercial loans mount [BBC]
Canada
Canada Manufacturing Sales October 2024
Canada Average Weekly Earnings YoY September 2024
Canada GDP Q3 2024
Average Weekly Earnings came in way too high, greater then 5% YoY for September and revised up 0.3 for August to 4.94%.
Anything above 5% will give the BoC cause for concern and may stop the rate cuts in their tracks. CPI and IPPI higher last week supported this call.
Bank of Canada Policy Interest Rate
Are rates cuts over for Canadians ?
Canada’s Trudeau Holds Crucial Meeting With Trump at Mar-a-Lago
United Kingdom
High wage inflation | Low growth | High debt | Poor immigration policy
BOE’s Lombardelli Warns Wage Growth Risks Slowing Rate Cuts [Bloomberg]
Australia
Australia Monthly CPI Indicator YoY October 2024
On the face of it, a great inflation number but the breakdown suggested exactly the opposite. Everyone wondered why the RBA / ABS invented a new indicator a couple of years ago. How disingenuous.
Sticky core inflation pushes rate cuts back to mid 2025 [KPMG]
Vic, NSW splurge putting Australia’s credit rating at risk: Fitch [AFR]
‘Uninvestable’: Business blasts Victoria’s ‘reckless’ financial state [AFR]
S&P reaffirms AA+ credit rating but warns of strong headwinds [NSW Govt]
The one reason Chalmers’ RBA overhaul could succeed or fail [AFR]
What's Next ?
It's interest rate decision next week for Australia, Canada and Europe, with the US, UK and Japan the week after.
This week's focus of interest will be Nonfarm Payroll.
More tariff talk.
Market focus to shift to France where a major political event is about to happen.
This Week's Important Economic Indicators [London time]
![This Week's Important Economic Indicators [London time]](https://vip.suberia.capital/hs-fs/hubfs/indicators-Dec-01-2024-01-01-27-8025-AM.jpg?width=658&height=570&name=indicators-Dec-01-2024-01-01-27-8025-AM.jpg)
