It didn't go nuts in the Eurozone

Economic indicators point slowly-almost steady ahead. Orders remain declining and from manufacturing there are signs of contagion to services. Consumption and construction hold. Brexit is hanging on the British elections, while the threat of US tariffs on cars has disappeared. Inflation at a flicker. Dollar and euro stable, yuan recovers. Long-term rates rise.

The Eurozone continues to be in trouble, although there is some faint sign of stabilization at low engine speeds, thanks to a better outlook for one Brexit orderly and on the move away from threat of tariffs Trumpians on European cars. There monetary policy is always hyperexpansive and the budgetary policy, which provides minimal support (the structural primary balance worsens), is called upon to do much more to support domestic demand, the only path to recovery.

United States and China hold. Economic policies are permissive in the two largest economies in the world and this allows them to resist the ongoing trade war. There confidence it has been comforted by the approach of a trade agreement, even if it will be only a stage on the road to a "major agreement" that continues to be in hiding. Retention (on the other side of the Atlantic) and stabilization (on this side…) are however fragile, because negative surprises are possible, both for the British elections and for the China-US negotiations. While I financial markets they will be in fibrillation for the dispute in view of the 2020 US presidential elections.

In Italy, stagnation dominates. The third quarter saw an increase in domestic demand, probably linked to private consumption (expenditure on basic income), while the contribution of (net) foreign demand was negative. The (modest) support of budget maneuver and low rates help, but policy support risks being undermined by new waves of distrust from political instability, following the elections in Umbria (and in January it's the turn of Emilia-Romagna) and the very unfortunate story of Ilva.

Inflation does not rise again. The trend in consumer prices remains cold, well below 1% in the Eurozone and in Italy (respectively 0,7 and 0,2% over 12 months in October) and below 2% in America (1,7%) , which validates the expansive policy of central banks. Despite the acceleration of the cost of labor. There are no signs of price increases raw material and oil prices (WTI) remain below $60 a barrel. It should be noted that, for the first time since the post-war period, the US trade balance for oil exchanges has become positive, a sign that America's production capacity is such as to keep the price of crude oil at reasonable levels.

Low guide rates remain unchanged for a long time, but long-term ones rise. Long-term rates are basically a forecast of short-term rates from here to the furthest maturity. And it was enough that a slight breeze of geopolitical confidence (Brexit and China-US negotiations) fan the markets (making low rates less likely forever) so that the yields of Bunds, BTps and T-Bonds, with rare synchronism, increased by about thirty basis points compared to last month. Of course, the breeze could change course and become a headwind if hopes are (once again) dashed. But for now, we are registering the fact that market rates move against the tide of central bank policy rates, which are in any case destined to remain unchanged for a long time. In the currency field, only the return of the yuan should be noted, which strengthened up to 7, which facilitates the negotiations on the tariff war.