The Trader's Guide to the Euro Area: Economic Indicators, the ECB and the Euro Crisis
The euro area remains in a state of flux and appears to be unsustainable in its present form. The outcome of the crisis may be unknown for years and a judgement on the project’s success or failure may be out of reach for decades.
In the meantime, analysts, portfolio managers and traders will still have daily, weekly, quarterly and annual benchmarks. They will have to analyze economic developments in the euro area and their impacts on financial assets. The objective of this book is to provide a framework for that analysis that is comprehensible to most financial market participants.
The book begins with a focus on coincident and leading economic indicators for the euro area. The following section looks at euro-area institutions. The next chapter focuses on the euro crisis. It attempts to provide an explanation of its origins and a glimpse of the potential outcomes. In addition, the tools needed to analyze the crisis as it evolves are presented. The last sections provide information unique to the economies of Germany, France, the U.K., Switzerland, Sweden and Norway.
Gross Domestic Product 5
The Expenditure Approach 5
The Output Method 10
The Income Method 11
GNP vs. GDP 11
Release Schedule 12
Trend Growth 15
The Business Cycle 16
Monetary Conditions Index 19
Effects of Monetary Policy on GDP 19
Effects of the Exchange Rate on GDP 21
Exchange-Rate Defl ators 23
Coincident Indicators 27
PMI Surveys 27
Industrial Production 31
Leading Indicators 35
Financial Conditions Index 35
The U.S. Business Cycle 38
ZEW Survey 39
Ifo Survey 41
M1 Money Supply Growth 52
Inflation Measures 57
Consumer Price Index 57
Producer Price Index 63
Labor Costs 65
Money Supply 68
Inflation Expectations 76
The European Central Bank 83
Traffic Light System 86
Two-Pillar Strategy 90
Monetary Policy Implementation 91
Intervention in the Currency Markets 93
Taylor Rule 95
Other Institutions 101
Council of the European Union 101
European Parliament 102
European Commission 102
European Council 104
Euro Crisis 105
Optimal Currency Area Th eory 109
Fiscal Consolidation 111
Quantitative and Qualitative Easing 112
Government Bond Purchases 115
Measures of National Solvency 117
Target2 Balances 121
Departure from the Euro Area 127
Tools for Analyzing Debt Sustainability 127
Labor Market 133
Political Institutions 137
Political Parties 139
United Kingdom 145
The Bank of England 145
Quantitative Easing 153
Inflation Measures 157
House Prices 158
Political Institutions 164
The Swiss National Bank 167
KOF Leading Indicator 168
“This is an excellent compendium for both the newcomer and experienced practitioner in European financial markets. David Powell covers the ground from the basics to the intricacies of the present crisis of the euro area, and provides a trader active in these markets, in a concise way, all the necessary background information.”
Thomas Mayer, senior advisor and former chief economist, Deutsche Bank
“A comprehensive, compact, easily accessible and readable book. A must-read for those who want to get an overview of trading-related aspects of the euro area.”
Klaus Wohlrabe, coordinator of the Ifo Surveys and deputy head of the Business Cycle and Survey Department, Ifo Institute
“There was a time when investors in the global financial markets did not devote a lot of their attention to the monthly trends in euro-area economic indicators. The reason for that was simple - U.S. economic data was the principal driver of global financial market trends. That is clearly no longer the case. The spillover effects that the European sovereign debt crisis have had on the rest of the world have made it critically important for investors to understand the economic and political backdrops in the euro area, and to stay on top of the latest economic and financial market trends in the member countries of the monetary union. Up until now there was no easily-accessible guidebook to help investors navigate through the myriad gobs of data coming out of the euro area as a whole, and the individual member countries in particular. David Powell’s book is the first serious work to address these issues, and it is done masterfully. It provides an excellent overview of all key euro-area economic indicators of which data watchers need to stay abreast. Investors who want to stay ahead of the game will find David Powell’s book both comprehensive and accessible - clearly the most up-to-date text for those who want to get a better handle of euro-area economic and financial market trends.”
Michael Rosenberg, former head of international fixed-income research, Merrill Lynch, and former head of foreign-exchange research, Deutsche Bank
Do you think you've discovered an error in this book? Please check the list of errata below to see if we've already addressed the error. If not, please submit the error via our Errata Form. We will attempt to verify your error; if you're right, we will post a correction below.
Author's note: Previous versions of the table titled "Euro area economic and financial data" are unavailable on the ECB's website. The author is therefore unable to verify whether the following changes are required because of his own oversight or a clarification by the ECB of its definition of a non-resident holder of euro-area debt. In any case, paragraph three on page 120 and footnote 33 should read:
33 The ECB reported general government debt held by non-residents stood at 44.6% of GDP and gross outstanding general government debt stood at 87.3% of GDP, as of February 18, 2013. (44.6/87.3 = 51.1). The ECB refers to non-residents as "other creditors" and indicates this category "includes residents of euro area countries other than the country who government has issued the debt." For example, a German holder - as well as an American or British holder - of Spanish government debt is considered a non-resident creditor. For the latest data, see: http://www.ecb.europa.eu/stats/keyind/html/sdds.en.html
The Trader’s Guide To The Euro Area: Economic Indicators, the ECB and the Euro Crisis is a user-friendly guide to understanding economic indicators specific to the European markets. It is aimed at institutional and retail investors and traders globally.
As the euro area remains in a state of flux and appears to be unsustainable in its present form, the outcome of the crisis may be unknown for years and a judgement on the project’s success or failure may be out of reach for decades.
In the meantime, analysts, portfolio managers and traders will still have daily, weekly, quarterly and annual benchmarks. They will have to analyse economic developments in the euro area and their impacts on financial assets.
The objective of this book is to provide a framework for that analysis that is comprehensible to most financial market participants.
Beginning with a focus on coincident and leading economic indicators for the euro area, this title includes sections looking at topics covering euro-area institutions; and the euro crisis – including an explanation of its origins, a glimpse at the potential outcomes and the tools needed to analyse the crisis as it evolves.
The last sections of the book discuss information unique to the economies of Germany, France, the U.K., Switzerland, Sweden and Norway.
The Trader’s Guide To The Euro Area: Economic Indicators, the ECB and the Euro Crisis
is available where books and e-books are sold.
Notes to editors:
- Review copies and jacket images are available on request
About the author:
David J Powell is an economist at Bloomberg LP in London where he focuses on euro-area economics and currencies. Previously he worked at Bank of America - Merrill Lynch as a currency strategist. He holds a master's degree from the London School of Economics and Political Science, where he wrote his dissertation on the creation of monetary union in Europe, and a bachelor's degree from New York University.