The stock market and economy move in sync over the medium-long term. That’s why it’s extremely important to understand the state of a nation’s/region’s economy. Is the economic data improving or deteriorating?
Let’s take a look at European economic data as of February 2018.
Germany is Europe’s economic engine.
Germany’s unemployment rate continues to fall.
German inflation has stabilized under the 2% mark.
YoY change in Producer Prices
Like inflation, the YoY change in Producer Prices is flat.
The Ifo Business Climate Index continues to trend higher. This is one of the best leading indicators for the German economy.
German Industrial Production continues to trend higher.
The German economy continues to grow at a healthy pace. There are no major signs of economic deterioration. This is a long term bullish factor for the German stock market. Here’s DAX on a monthly bar chart.
France has the 2nd largest economy in the Eurozone after Germany.
The French unemployment rate rose last month. However, the general trend is still DOWN.
The French inflation rate continues to trend higher.
YoY % change in Producer Prices
The YoY % change in Producer Prices has been falling a little.
French Business Confidence continues to trend higher.
Despite a dip last month, French Industrial Production is trending higher.
Economic Sentiment Index
France’s ZEW Economic Sentiment Index has been flat for many months already.
France’s Consumer Confidence has also been flat for months already.
France’s economy is growing, although it is a little weaker than Germany’s economy. There are no signs of significant economic deterioration yet. This is a long term bullish factor for the French stock market. Here’s the CAC 40.
Italy has the 3rd largest economy in the Eurozone.
The Italian unemployment rate is trending lower.
Italian inflation is trending lower.
Despite falling a little over the last 3 months, Italian Business Confidence is still trending higher.
Italian Industrial Production has been falling over the past 3 months and flat over the past year.
ZEW economic sentiment index
Italy’s ZEW economic sentiment index has been trending higher.
Italy’s Consumer Confidence has been flat over the past few months.
Italy’s economy is growing, although it is weaker than France’s economy, which is weaker than Germany’s economy. This is a long term bullish factor for the Italian stock market. Here’s FTSE MIB. It’s at multi-year resistance.