26 October 2021
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Business confidence in Germany sinks to six month low

The familiar foes of material and labour shortages are weighing on the outlook for growth in the near term.

By Edward Bell

  • Germany’s IFO index of business confidence fell to 97.7 for October, its weakest level in six months and fourth consecutive monthly decline. Disrupted supply chains and higher input costs are contributing to sagging confidence while the expectations index also fell, hitting 95.4 in October from 97.4 a month earlier and representing the weakest level since February. The general slowdown in the global recovery, worsened by shortages of both goods and labour, will likely drag on Germany output in the final months of the year.
  • Measures of regional activity in the US showed a diverging trend for recent prints. The Chicago Fed national activity index slipped to -0.13 in September from just about flat a month earlier while the Dallas Fed manufacturing gauge improved to 14.6 in October, up from 4.6 a month earlier. Input prices in the Fed’s measure remain high but did fall slightly from September levels while wages moved higher.
  • A UN agency highlighted that global concentration of carbon emissions and other greenhouse gasses in 2020 remained far in excess of levels that would be consistent with hitting the Paris Agreement’s goals of limiting global warming to 1.5 – 2 degrees Celsius above pre-industrial levels. The warning comes just ahead of the start of the COP 26 summit where international leaders will try and strengthen their climate commitments. In the run up to the climate summit, Saudi Arabia has announced it will establish an investment fund of USD 10bn to finance carbon capture and storage as well as cleaner cooking fuels.

Today’s Economic Data and Events

18:00 US New home sales Sep: forecast 759k

18:00 US Conf. board consumer confidence Oct: forecast 108.3

Fixed Income

  • Treasury markets started the week on a mixed footing with gains on the belly of the curve, led by the 3-5yr buckets while the very long-end extended its sell off. Yields on the 2yr UST fell almost 2bps to 0.4353% while the 10yr dipped marginally lower and closed at 1.6307%.
  • Emerging market bonds were also mixed overnight with a modest drop in Turkish 10yr bonds while South African 10yr bonds gained slightly. In India, yields fell around 1bp on 10yr government bonds to 6.35%.


  • The dollar gained to start the week with the DXY index up 0.18% to 93.813 mainly due to a drop in EURUSD of 0.3% to 1.1608. USDJPY also moved in favour of the dollar with the pair gaining 0.19% to 113.71. There were few material catalysts to support major currency moves ahead of central bank meetings from the Bank of Japan and ECB later this week. Sterling was little changed on the close with GBPUSD at 1.3767.
  • Commodity currencies were mixed despite still strong gains in energy markets. USDCAD rose 0.13% to settle at 1.2382 while AUD gained 0.33% to settle at 0.7491.


  • Global equity benchmarks were generally stronger overnight with the S&P gaining 0.47% while the Nasdaq rose 0.9%. The FTSE added 0.2% overnight while the EuroStoxx 50 was marginally softer.
  • In early trade today the Nikkei is up strongly—more than 1.8%--while the Hang Seng and Shanghai Comp. are both down by around 0.3%.
  • Local markets were weaker on Monday with the DFM down 0.5% and the ADX off by 0.2%. In Saudi Arabia, the Tadawul managed a gain of 0.35%.


  • Oil prices extended their moves higher with Brent futures rising by 0.5% to USD 85.99/b after having broken above USD 86/b earlier in the trading day. WTI settled near unchanged at around USD 83.60/b after having moved up to as high as USD 85/b intraday.

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Written By

Edward Bell Head of Market Economics

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