Key Takeaways
- French industrial production saw a month-over-month decline of 0.7% in August, contributing to a significant slowdown in year-over-year growth for both industrial and manufacturing output.
- The French Prime Minister has pledged against using Article 49.3 to pass the upcoming budget, indicating a potential shift towards a more consensual legislative process.
- Italy's public debt is forecast to rise in 2024, with a marginal decrease only expected from 2027 onwards, highlighting persistent fiscal challenges.
- Global equities experienced a substantial $26 billion inflow in the latest week, driven by an ongoing AI-focused rally and a general reduction in financial market volatility.
European economies are presenting a mixed picture, with France grappling with a notable slowdown in industrial and manufacturing output, while Italy faces a projected increase in its public debt over the coming years. Meanwhile, global financial markets are witnessing significant inflows into equities, largely fueled by enthusiasm for artificial intelligence.
French Economy Shows Weakness Amidst Political Pledge
France's industrial and manufacturing sectors recorded a downturn in August. Industrial production fell by 0.7% month-over-month in August, following a revised 0.1% decline in July. On a year-over-year basis, industrial production grew by only 0.4%, missing estimates of 0.6% and significantly down from the previous 1.3%. Manufacturing production also saw a 0.7% month-over-month decrease and a mere 0.5% year-over-year increase, compared to a prior 1.5%. These figures suggest a weakening in the country's industrial activity.
In a significant political development, the French Prime Minister announced that Article 49.3 of the constitution will not be used to push through the upcoming budget. This constitutional measure allows the government to pass a bill without a parliamentary vote but can trigger a no-confidence motion. The decision may signal a move towards seeking broader parliamentary consensus for the budget.
Italy's Public Debt on an Upward Trajectory
Italy's government forecast indicates that its public debt is set to rise in 2024 before experiencing a marginal fall from 2027. The Treasury's projections show public debt at 135.3% of GDP in 2024, rising to 136.6% in 2025 and 137.6% in 2026, before a slight decrease to 137.4% in 2027. This sustained high level of debt, the second-highest in the Eurozone after Greece, continues to be a key concern for the nation's fiscal health.
Global Equities Attract Inflows as Volatility Eases
Global equities saw a substantial $26 billion inflow in the latest week, according to Bank of America (BAC) citing EPFR data. This strong investor interest comes as financial market volatility is observed to be falling across the board. Investors remain transfixed by the AI-driven rally, suggesting a continued focus on growth-oriented technology stocks.
Central Bank Officials Scheduled to Speak
A busy day for central bank communications is expected, with several key officials scheduled to speak. European Central Bank (ECB) speakers include Sleiijpen, Schnabel, Lagarde, Villeroy, and Wunch. Bank of England (BoE) Governor Andrew Bailey is also slated to deliver a keynote speech. From the U.S. Federal Reserve, officials Williams, Goolsbee, Miran, Logan, and Jefferson are scheduled to speak, with markets closely watching for any signals regarding future monetary policy.
Other Noteworthy Developments
In other news, a large fire erupted at a Los Angeles-area Chevron (CVX) refinery. Separately, a court has ruled that a Baltic Sea cable incident falls outside Finland’s jurisdiction. Geopolitical tensions also remain, with Russia reportedly targeting UK satellites on a weekly basis. In corporate news, Malaysia’s Khazanah stated it is not in talks with China regarding a rare earths project.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.