Tag Archives: Euro zone

Where is the bottom in Europe and Euro

Many analysts are so positive and belive Europe`s financial crisis is over. ECB`s Precident Mario Draghi started to pump a lot of money into the market and will continue to do that until next year. The Euro has plummeted, trading at 1,07, and many think that this is the bottom.

I see different things in my TA.

Euro symbol

First of all; The inflation rate is still -0,1 percent, and that mean deflation, which is not a good thing. The figure is skewed due to the size of Germany`s economy. Actually, things are worse in other Euro areas. Take a look at this;

Finland -0,1
France -0,1
Greece -2,1
Ireland -0,6
Italy -0,09
Poland -1,5
Spain -0,7
Switzerland -0,9

This is deflation, and this is not a growth story like Venezuela which had an inflation rate of 68,5 (!) in December 2014. How is it going on with the buying power in Europe right now? Falling prices is good for the unemployed people in Europe, because their buying power is weak.

But how many are unemployed in Europe right now? The unemployment rate in the Euro Area is 11,30, but once again; it`s even worse in some areas in Europe. Worst is Greece with an unemployment rate of 25,70. This is worse than Nigeria (23,90), and South Africa (24,30).

Spain 23,7
Italy 12,7
France 10,4
Finland 10,1
Ireland 10,0
Poland 11,7

Unemployment rate in the U.S is 5,50 right now, and that`s much better than it was a year ago. The unemployment rate in the Euro Area is better than earlier this year (11,40), but it`s still very high and not low enough to claim that the reversal is underway. Again; the numbers are skewed due to Germany`s low unemployment rate of 4,8 percent.

Youth unemployment rate is 22,90 in the Euro Area, which means about 5 million Europeans under the age of 25 are unemployed. This is a big problem. Take a look at the Youth unemployment rate numbers below;

Finland 21,4
France 24,7
Greece 51,2
Ireland 21,6
Italy 42,6
Poland 20,8
Spain 50,7
United Kingdom 15,9

Youth unemployment rate in the U.S is 12,3, but what is that compared to Greece or Spain with their 51,2 and 50,7 percent youth unemployment? Can you belive that? More than half of the teenagers at the age of 25 or below is unemployed in Greece and Spain.

It`s very expensive for a country to have a lot of unemployed people.

Severe austerity measures continue to this day and they are hollowing out Europe`s economic growth. Just take a look at the numbers. Before the Greek crisis flared up, their debt to GDP stood at 113 percent, but today their debt to GDP is amazing 174,9 percent.

Debt to GDP in Euro Areas is 90,9, but take a look at the other countries in Europe;

Italy 132,1
Ireland 123,3
France 92,2
Finland 59,3
Germany 79,0
Spain 97,7

To compare; Debt to GDP in the U.S is 101,53. In Japan 227,2 to name a few. You can imagine how Europe`s debt is after ECB`s QE program is finnish?

All the austerity measures that Europe has implemented have done nothing to reduce debt levels. Instead, they are hurting the people of Europe, and the economic growth is far away from the truth.

There is NO evidence Europe`s economy is improving, and when you look at the numbers you know that this is gonna take a long time to recover, and I`m not talking about a few weeks, a couple of months or three. But I know there are a lot of them who belive so.

The Euro is trading at 1,07 and its long-term uptrend line is broken and minor cyclical support is declining. If you follow TA, you can see that the Euro can go down to about 0,75. Good news will make the opposite trend.

The Euro can go down to 0,35 but I dont`t think it will go that low. It will be complete chaos in Europe once the currency falls back to its 2001 low of 0,80. Analysts at Morgan Stanley say the euro is undervalued by about 20%, and fair value should be about $1,32, they said.

The Euro Area is in trouble and Greece is running out of money, and the future of the common currency itself is in peril, because some investors is worried that one member`s exit could trigger an unpredictable unraveling.

Analysts at investment bank Morgan Stanley say the euro should be worth $1,59 based on Germany`s strength, and it ought to be $1,09 for Greece. So, Greece is closer to haveing a fair value than Germany. This valuation should trigger the question of who should leave the eurozone. Greece? Germany? Others?

The euro has never been less popular with the international community. Bearish bets have reached a record. People hate the euro, and that is not only because the protester Josephine Witt showered Mario Draghi with confetti.

Average yield on German government debt fell below zero for the first time today. Lending to Germany for ten years will earn you just 0,088 percent in yield. That`s nothing. Investors will soon be paying for owning a 10-year German bond.

Why should you own euros invested in negative-yielding securities when dollars generate positive returns? And how popular will euro be if we face a Grexit?

«Without deep economic reform or further relief, S&P expects Greece`s debt, other financial commitments to be unsustainable,» the rating company Standard & Poor`s Corp said.

The recovery in the U.S has been slow. Now Europe is next with QE. It didn`t work in Japan. Will it work in Europe?

 


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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Interest-rate cut in the Euro Zone

 

Japan`s Nikkei index rose to a 7-week high today, up +0,97%. Yen retreated against the dollar and a record high for Wall Street helped the Asian stocks on upbeat U.S housing data. The broader Topix advanced 1,2% to 1,194,69.

 

European stocks are also up today, helped by Italy`s Prime Minister Matteo Renzi. FTSE MIB outperform after Italy`s Prime Minister`s centre-left Democratic Party`s reform were endorsed by a strong showing in European elections.

ECB

A big surprise for many nervous «Sell in may and go away»-investors on friday. The U.S indices increased with the DOW up +0,38% to 16,606,27, Nasdaq +0,76% to 4,185,81, and S&P 500 +0,42% to 1,900,53.

 

ECB`s President Mario Draghi says the policy makers are watching the market closely and once they see low inflation they will be ready to take some action. Draghi said they are looking for a negative spiral to take hold between low inflation, falling inflation expectations and credit.

 

«We are not resigned to allowing inflation to remain too low for too long», Draghi said today. He is trying to guide the euro area through a fragile economic recovery that remains threatened by subdued pricing power.

 

Next ECB meeting is June 5 and they are now working on a package including interest-rate cuts and liquidity injections. Many investors will wait for the next ECB meeting and the lower the interest-rate is, the bigger the problem in the economy is. You are tough if you buy stocks now.

 

Reports today:

 

04:00 a.m EST ECB President Draghi Speaks

All Day Bank holiday

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Low inflation in Euro zone

The yen is weaker today, but Japan`s Nikkei is trading up at its three-week high. A nice day, but it is the worst quarter performance for Nikkei in about two years. It’s also a «window dressing» as the books close for the fiscal year-end today. Nikkei rose to 14,827,83, up 0,9%.

Janet Yellen

The inflation in Europe is at its lowest since November 2009. The question now is what ECB (European Central Bank) will do to stop this threat of deflation in the currency bloc. It`s far from the deflation we saw in Japan in early 90`s, but it is a clear sign of a weak economy.

ECB will probably cut the interest rate on the meeting on Thursday, but because of this year`s late Easter, they will probably wait until the next meeting which is in June this year. It`s still a case for easing.

That`s why we see the European markets trading up today to a three-week high. There are growing speculation that China will start to stimulate its economy too. This is music in investors ears, and not only European shares are up today.

It seems like the U.S markets will open up today too. That`s a nice, green and positive territory. Right before a speech by Federal Reserve Chair Janet Yellen. She is scheduled to speak in Chicago at 09:55 a.m EST.

Investors will listen to what she have to say about interest rates. Last time Yellen spoke about the possibility of an earlier-than-anticipated increase in rates, the equities dropped. This is the last day in march, and the S&P 500 is nearly flat this month. Up 0,5% for the quarter.

Reports today:

09:45 a.m EST  Chicago PMI
09:55 a.m EST  Fed Chair Janet Yellen speaks

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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