Market Commentary The Eurozone

The euro suffered colossal losses, as long liquidation has been taking its toll. The money markets in the Eurozone remain basically frozen, and the 3-month euro interbank rates climbing to a record high. The financial crisis spread further in Europe last week, and Fortis was rescued by a 11.2 billion euros package from the governments of Belgium, the Netherlands and Luxembourg. The troubles are piling high and fast.

The Eurozone PPI contracted 0.5 percent in August after expanding 1.3 percent in July, and decreased to 8.5 percent on the year from 9.2 percent. On this milieu, ECB head Trichet sounded confusing (sort of standard for central banks heads): risks for future growth to the downside, but no cutting of borrowing costs. With the Eurozone economy weakening, this talk is euro bearish.

The Eurozone services confidence index was flat in September 0 from 3 in August, the consumer confidence was stable at –19, the industrial confidence worsened to -12 from –10, the business climate indicator to -0.79 from -0.33, and the economic confidence to 87.7 from 88.8.

Meanwhile, the Eurozone retail PMI fell to 46.2 in September from 47.7 in August.

But the Eurozone PMI services managed to edge up to 48.4 in September from 48.2 in August. On an individual basis, the German PMI rose to 50.2 from 49.3, while the French PMI slipped to 50.1 from 50.4.

The Eurozone retail sales rose 0.3 percent in August but contracted 1.8 percent on the year. That monthly strength won’t last, as the regional economy is going down the drain.

German unemployment fell by 29,000 to 3.18 million in September after falling 40,000 in August. The ILO jobless rate was 7.2 percent, down from 7.3 percent in July. It is 7.3 percent in France it and 4 percent in Japan.


German retail sales expanded 3.1 percent in August after contracting an upwardly revised -1.0 percent in July. That number is too exotic, so it should be reversed next month. On the year, sales sank 3.0 percent from 0.6 percent previously.


The Eurozone unemployment rate climbed up to 7.5 percent in August from 7.4 percent in July, economic slowdown is spreading.



The final Eurozone PMI came in at 45.0 in September from 45.3 previously. On an individual basis, the German report fell to 47.4 from 48.1 and the French PMI to 43.0 from 43.6.


The EurozoneCPI probably peaked in July at a record 4.1 percent annual basis, after the August and September preliminary reports came in at 3.8 percent and then 3.6 percent, respectively.

Along the same lines, French PPI fell 0.5 percent in August from 0.7 percent in July, and slipped to 6.9 percent from 7.7 percent on a yearly basis.

Also, Italian PPI fell 0.2 percent in August from 0.8 percent previously and to 8.2 percent from 8.7 percent on the year.