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Even as the European Central Bank's balance sheet run-off accelerated this year (no more reinvestments), spreads with Germany for periphery govts have continued to drop, reaching multi-year lows for Italy or Greece. Europe looking a lot more fiscally responsible and stable than the US.

🇪🇺 gas storages are currently more in line with normal after two years of exceptionally warm winters. Even with the current slower pace of refill, storages should be 85% full by early October. Probably also why the European Commission tightened Russia energy sanctions.

As expected, the car-heavy 🇪🇺 economies like 🇸🇰&🇸🇪 are feeling the most pain from new 🇺🇸 tariffs (25% tariff on cars & parts). Based on April trade data, the effective tariff on imports from 🇸🇰 jumped from 2.8% to 17.3%; for 🇸🇪 from 4.1% to 13.1%. For 🇪🇺 from 4.5% to 9.3%.

Sweden's Sveriges riksbank cut rates today citing growth concerns after signalling it is done easing and will be data-dependent at previous meetings. European Central Bank's focus also likely to shift to growth as US tariffs prove disinflationary (negative demand shock), although uncertainty remains.

Tensions in the Middle East mean a higher geopolitical risk premium on EU gas prices (reliant on LNG imports also via Hormuz Strait), up by 20% versus May and y/y. Energy prices have been the main disinflationary driver pulling latest ECB inflation forecast for 2026 to just 1.6%.

If European NATO countries increase spending on defence to 3.5% of GDP, then the ring of countries around Russia that together spend on defence as much as Russia shrinks from all the way to Belgium up to... Germany.

Measured by actual individual consumption by households, 🇭🇺 indeed slipped from being the third best off in CEE to being the worst off - in the whole 🇪🇺. The indicator has its own shortcomings but complements other series that show relative rise and decline of 🇪🇺 countries.

Credit flow to the private sector in the Eurozone has been tapering off before it picked up properly, as uncertainty weighs on both household big purchases and corporate investment. Goes against the positive (soft) survey data recently. Growth won't be credit-led.

Small uptick in Eurozone inflation in June not a concern, as driven by lower energy price base effects. Positively, food prices, which surged early this year, appear to have turned. Core inflation unchanged versus May but stronger € and weak demand put downward pressure on it.

Quite the decade at the European Central Bank. From fighting deflation risks in late 2010s to the largest inflation shock in living memory in 2020s. Given uncertainty and more supply shocks (climate, geopolitics), European Central Bank now more alert to upside risks to inflation. The bar to restart QE very high.

Another day, another proposal for more joint EU debt. But with just over a year to go, half of the funds from the pandemic era joint instrument remain unused. Recovery and Resilience Facility (current prices): Full envelope: €807bn Requested: €631bn Absorbed to date: €317bn

...and importing nuclear generated electricity from France.

Germany's industrial output surprised on the upside in May, although growth was not broad-based, driven by capital goods and energy. However, growing signs that German industry has bottomed out with cyclical tailwinds coming to the fore. Growth is again positive on annual basis.

Since European Central Bank started tightening policy, spreads with Germany shrunk in some high debt economies (🇮🇹🇬🇷🇵🇹) but rose in others (🇫🇷🇫🇮🇧🇪). Public debt often rolled off the ECB's balance sheet faster in *the former* group. Growth & fiscal outlook & govt credibility drive yields/spreads.

The recent sharp decline in fertility rates across the EU has huge implications for the long-term. United Nations & other forecasters keep assuming fertility rates will rebound. Instead they only go lower. As 🇵🇱 shows, it's not a matter of govt spending on families, other factors at play.

Italy's govt is back to running primary surpluses, focusing on individual quarters makes no sense.

A minor issue with this is that the likes of Denmark import up to half of their electricity demand in summer months when the wind doesn't blow as much. Obviously we can't all do that. And cost of building the needed storage and interconnect infrastructure would be prohibitive.

🇨🇳's rise as the world's leading exporter of passenger cars has been spectacularly fast & shows no signs of stopping. And this is just one example. Unfortunately 🇺🇸 trade protectionism will only encourage 🇨🇳 dumping (needed for growth) & hollowing out of industries of 🇺🇸 allies.

Despite 🇺🇸 tariffs, net exports contributed almost 1.5ppts to 🇨🇳 GDP growth in Q2. Exports grew at 6.2% y/y while imports dropped again (!). GDP deflator is down 1.2% y/y, the worst since financial crisis, reflecting aggressive cost cutting to grab global market share (dumping).

Surprisingly strong rebound in Eurozone industrial production in May, driven by 🇩🇪 (+2.2% m/m) & 🇮🇪 (+12.4%). 🇺🇸 tariff pause and exemption for pharma playing a big part. After Q1 GDP was boosted by 🇺🇸 inventory build-up, Q2 may not be so bad (flash estimate out in 2 weeks).