Monday, 16 July 2018

On confidence, coalitions and borders

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Anthony Peters looks at US data, the German deal and British identity.

If the market was to have been hit in the face by an unexpected economic indicator out of the US, then yesterday’s remarkably weak November Consumer Confidence number had to be the one.

Anthony Peters columnist format

Anthony Peters

SwissInvest strategist

Consumer confidence is one of the more volatile releases but having locked in at over 80 throughout Q3, finding the first two months in Q4 in the low 70s is causing some head-scratching, not least of all because the public rhetoric on the economy remains so positive.

On the flip-side of the coin, the Case-Shiller housing stats will have put a smile on many faces as each and every component pointed in the right direction and where real estate prices go, consumer confidence will inevitably follow. During the pre-crash housing boom, the fashionable concept was of the positive influence of the “wealth effect”. With the Dow up by 22.65%, year to date and the S&P ahead by 26.4% and with house prices on the move, consumer confidence should be on fire too. Hence the perplexed gasps. If axiomatic relationships like these can’t be relied on any more, what the devil can?

There is a raft of secondary releases out today but with Thanksgiving upon us and with half of the trading floors already at the airport and the other half leaving at lunchtime, I can’t see too much of relevance happening today, despite the gentle sabre-rattling which is going on between China and the USA over the new airspace dispute.

Berlin pact

Meanwhile, Europe is a bit more political than economic with the news breaking this morning that Chancellor Angela Merkel appears to have thrashed out a coalition deal with the SPD opposition. First indications are that neither side has done too well and like all agreements of this nature, if both sides feel they have conceded too much, then it is most probably the correct outcome.

Most notably, it is a coalition focusing on domestic issues from citizenship to minimum wages but with little for the international community to take away in terms of how Germany will play its part in the EU and the Eurozone, should new financial stresses emerge. On that front, it is very much “steady as she goes”. Whether this is because the parties agree or whether it is because they don’t want to upset the apple cart by, to mix my metaphors, washing their dirty laundry in public is for them to know and for us to find out.

Perhaps it is because both coalition blocks, each supposedly representing one side of the social contract, are patently aware that their country has disproportionately benefited from the travails of its Eurozone partners by way of the weak currency and that the best policy at this point in time is to remain stumm on the subject. Speculating on how the government might react to renewed stresses would be as good as inviting them to begin. The policy of denial has worked a treat for the past eighteen months and nobody is going to risk the peace.

Border wars

In the UK on the other hand, things are not at all happy. David “call me Dave” Cameron has rattled a lot of cages this morning with an article, published in the FT, in which he questions the unfettered and free movement of citizens within the EU. In this, he is addressing a growing wave of unease which is sweeping not only this country but is manifesting itself at street level in most of the wealthier member states.

It is hard for many mainland Europeans to understand what the debate in the UK is all about but it is not until one looks at a map very closely that one finds the answer. We are an island and as such there are not, never have been and never will be questions as to where our borders are. Border disputes, other that minor ones with the cattle rustling clans in kilts, are not something the British can relate to.

We clearly understand and applaud the economic principles which bind the EU together but the political priorities which underlie the urge never to see another border dispute and hence another land war on the European continent is not something the British can instinctively relate to. The price which the likes of France and Germany are willing to pay in order to effectively suppress national identity is something the people of this country simply cannot fathom.

Hence, the English also cannot get their head around the Scottish demand for independence. Why bemoan being disregarded as the lesser of two partners in the United Kingdom in order to become no more than a grease stain on the fabric of a greater EU?

I must confess, I did giggle when I heard a speaker of the Scottish nationalists declare that Scotland had been a member of the European Union for over forty years. Scotland has been nothing of the sort an no more so than have the Kingdom of Bavaria, the Duchy of Normandy or the Kingdom of Naples and Sicily. Chapeau to the pro-union camp for keeping quiet, letting the SNP continue to spout its nonsense and letting it blow its ammunition before the enemy is even in sight – broadswords against muskets.

 Finally, happy Thanksgiving for tomorrow to those transatlantic cousins concerned.

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