This morning we have GDP figures out of the Eurozone for the last quarter of 2021, which will provide greater colour on the pace of recovery throughout last year. The market is predicting 4.7% year-on-year growth for Q4 which would represent an increase from Q3’s 3.9% print. Last Friday, the Eurozone news cycle was dominated by GDP figures of out France, Spain and Germany, however the data indicated that while there had been a sharp recovery from Spanish and French economies, this was less apparent for the EU’s largest economy.
For example, the Spanish economy expanded at its highest rate since 2000 at 5% while the French economy grew 7% – its highest level in 52 years. Meanwhile, Germany’s economy grew 2.8% in 2021 and in fact contracted 0.7% in Q4, meaning that the economy remains some 1.5% below pre-pandemic levels (it’s worth remembering that the US economy is now 3.1% above pre-pandemic levels). Given Germany’s energy crisis, micro-chip shortages and supply chain issues hindering manufacturing and geo-political concerns on its eastern side, some analysts are warning that the country risks falling into recession.
UK & EU Regulations
As Johnson prepares to fly over to Ukraine and address the heightening tensions, additional preparations are in place for a major policy announcement which would make it easier to get rid of EU regulations currently intertwined within various British statutes. The government state that this “Brexit Freedoms” Bill would help cut around £1bn in red tape for businesses, however concerns have been raised from within devolved governments in Wales, Scotland and Northern Ireland with for instance, the Counsel General and Minister for the Constitution, Mick Antoniw, seeing it as a “power grab”.
Over the weekend, Downing Street confirmed that the PM and Chancellor were committed to the 1.25% hike in National Insurance Contributions set for April, which has faced criticism from both sides of the dispatch box and which some considered Boris may U-turn on to gather support from disgruntled backbenchers.
Sticking with Downing Street, the Metropolitan Police have denied that they are causing delays to the publication of Sue Gray’s report on parties during lockdown, however they have insisted that it ought to be censored in order to avoid distorting its own probe. Nevertheless, it is expected that the report will be published some time this week – although ultimately, this is what was said a week ago.
Rising Oil Prices
The rising price of Oil also continues to make headlines as it reached over $90 dpb last week owing to geopolitical concerns and the prospect of greater sanctions vis-à-vis Russia. Hence, many in Wallstreet are predicting that Brent could surpass $100 by summer. Analysts are also considering how OPEC’s spare capacity appears to be shrinking, meaning that they would be less likely to soften the blow of a supply-side shortage or demand side hike.
In addition to the aforementioned Eurozone GDP print, at 13:00 today we also have CPI figures out of Germany, where the market is expecting inflation to come in at 4.7% for January and this would represent a slight easing off from December’s print which came in at 5.7%.
Tomorrow, the market will be paying close attention to PMI figures out of the US and UK, in addition to the ECB’s Bank Lending Survey which will provide insight into the fiscal and monetary climate throughout the Eurozone.
Have a great week.