- Japan Trade data to be digested on otherwise modest day for data, Draghi
testimony the highlight on the central bank front; politics set to
dominate as German coalition talks collapse
- Germany: all eyes turn to President Steinmeier; deep divisions visible in
coalition talks suggest that fresh elections may be the only viable option
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** EVENTS PREVIEW **
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A rather quiet day in terms of scheduled data and events gets the new week under way, with Draghi's quarterly testimony to the European parliament's economic and monetary affairs committee the likely highlight, while the data schedule has German PPI and the weekend property prices to digest ahead of the monthly activity data 'dumps' from Poland and Russia. The collapse of the German coalition talks and Hammond's weekend TV interview ahead of this week's UK Budget will likely be the other talking points. So where to now for Germany? President Steinmeier (SPD) will have to decide whether it is worth trying to persuade his SPD colleagues to row back on their refusal to enter any coalition talks, which seems highly improbable given the SPD is in turmoil after their worst ever federal election showing. He could also see whether a minority government might work, though the failed coalition talks suggest that neither a CDU/CSU/FDP or a CDU/CSU/Green minority govt would last very long. That leaves fresh elections as perhaps the most likely outcome, though with a high risk that the balkanisation of German politics becomes even worse, particularly if the AfD were to increase their share of the vote, though the latest opinion polls suggest little change vs the September 24 result. For the rest of Europe, the simple point is that the German caretaker govt will not be in a position to engage in any serious negotiations on Brexit, or reforms of the Eurozone or EU. That said, the rather tetchy and fragile tone in risk markets will hardly be helped by these developments in Germany, particularly with optimism on any near term passage of US tax reforms fading quite rapidly.
from Marc Ostwald