RV Blog Europe’s Wake-Up Call

Europe’s Wake-Up Call

Also lumber's rise, the U.S.'s PMI data, and a preview of upcoming Real Vision interviews

According to PMI surveys released today, the European recovery is losing steam.

The Markit Composite reading for the Eurozone came in at 51.6, technically indicating expansion…

…but this figure was lower than the 54.9 reading in July,

As well as the 55.0 that economists and policymakers were expecting for August’s reading.

French and German services readings both failed to meet expectations…

 …and while the German Manufacturing PMI reading was robust, 

in France the manufacturing survey stood at 49.0.

That’s right, the French manufacturing sector is officially in contraction.

This news hit the euro hard, which today sank over 60 bps against the dollar.

In the U.S. the indicators were much better. The Markit Composite PMI came in at a robust 54.7…

…supported by a dominant services reading of 54.8.

But the headline figure that’s really turning heads is existing home sales, which came in at 5.86 million for the month of July

 This marks a staggering monthly growth of 24.7% – the highest on record.

And it’s not as if these properties are being liquidated in a fire sale – no quite the opposite – Prices jumped 8.5% from a year earlier.

So based on the readings, there’s a stark contrast between the two continents. While Europe was hit with a wake-up call today, it looks like the American dream has yet again bought itself more time.

This surge in housing sales likely has two main drivers: first, professionals fleeing big cities are buying homes in the suburbs, and the second driver is of course cheaper borrowing costs.

This bonanza in housing has no doubt exerted upward pressure on lumber, which is on an absolute tear.

Lumber is something that Larry McDonald will be speaking about with Raoul on Monday – they talk about commodities rising more generally as a result of monetary and fiscal stimulus – this is something Larry calls “The Cobra Effect.” 

And speaking of rising commodities, today Bill Fleckenstein sat down with Rick Rule to tie a bow on our weeklong coverage of precious metals, they put gold in a proper macro context, they explain the importance of jurisdictional risk, great interview, definitely check that out.


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