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Germany’s ‘Whatever It Takes’ Moment Powers European Markets

• Merz announces historic plan to fund defense, infrastructure
• Stocks rally, bonds slump as investors assess spending shift

Germany’s extraordinary spending plans are shaking up the region’s markets, powering European equities past US peers this year and reviving the euro from the brink of parity with the dollar.

Chancellor-in-waiting Friedrich Merz said Germany would do “whatever it takes” — a catchphrase made famous by former European Central Bank chief Mario Draghi — to defend the country and amend the constitution to exempt defense and security from limits on fiscal spending.

The move drove up Germany’s benchmark DAX stock index by as much as 3.8% and the prospect of more borrowing sent the country’s bond yields tumbling, both seeing the biggest moves since 2022. The pan-European Stoxx 600 climbed 1.8% to near a record set earlier this week, while traders bet on hefty gains for the euro.

“Big, bold, unexpected — a game changer for the outlook,” said Evelyn Herrmann, Europe economist at Bank of America Corp., adding that it represented a “paradigm shift.”

Making Europe Great

The historic plan, unlocking hundreds of billions of euros for transportation, energy and housing, is a dramatic shift that upends Germany’s controls on government borrowing. It invokes memories of Draghi’s 2012 speech to save the euro, which became a shorthand for policy determination.

Deutsche Bank AG strategist Maximilian Uleer — a long-standing bullish voice on European stocks — said the region was facing its own “Make Europe Great Again” moment — a play on US President Donald Trump’s campaign slogan for America.

Uleer reiterated his overweight stance on European stocks overall, calling the German proposal “above even our positive expectations.”

Stocks geared toward the German economy jumped, with the country’s mid-cap MDAX Index surging as much as 6.9% — the most since March 2020. That was led by construction firms such as Bilfinger SE and Hochtief AG, up 24% and 18% respectively. Defense companies like Rheinmetall AG added to a stellar rally this year, while heavyweights Deutsche Bank and Siemens AG were both up over 8%.

“There’s a very strong dynamic in Germany,” said Frederic Surry, deputy head of equities at BNP Paribas Asset Management, who has reduced his overweight on the US in favor of Europe. “We’re looking at a broadening, notably on midcaps.”

Winning Stocks

European stocks have been among the best performers in the world this year, as investors bet on stimulus and a potential cease-fire in Ukraine. Cheaper valuations have also proved attractive at a time when funds are exiting pricey US equities, overshadowing concerns around a global trade war for now.

The benchmark Stoxx 600 is on course to outperform the S&P 500 by the most in a decade on a quarterly basis, according to data compiled by Bloomberg. Nine of the top 10 best performing stocks this year in the MSCI World Index — the benchmark for the developed world — are now European, data compiled by Bloomberg show. They include defense companies Rheinmetall, Thales SA, Leonardo SpA and Saab AB.

Euro Recovery

The euro climbed nearly 1% to its strongest level since November at over $1.07. Just a month ago, the common currency was a whisker away from parity with the dollar, trading almost at $1.02. This shifting dynamic could potentially reverse a multi-year US dollar rally, according to Julian Weiss, head of global Group-of-10 vanilla FX options trading at Bank of America.

Banks including Goldman Sachs Group Inc. have been abandoning predictions that the euro will slide to be worth the same as one greenback. Instead, some hedge funds are now buying options wagering the euro will climb another 12% to $1.20 in six to nine months, according to traders familiar with the transactions. “This is Merz’s ‘Draghi moment’,” said Kathleen Brooks, research director at XTB. “The strong recovery in the euro suggests that Europe’s star is rising.”

Europe about to abandon its neoliberal fiscal “balance the budget” rule to invest heavily in military and infrastructure.

Is this the turning point for the European economy?

Meanwhile, Trump appears to have bought into the charlatans who told him that “dollar must weaken” in order to re-industrialize, which will prove fatal if it keeps going. I give it a few months before the US realizes the huge mistake it is in and will likely attempt to pivot by then.

A number of schools in Hunan, Anhui and Zhejiang provinces in China have recently started implementing a new policy of 2-day off week for high schoolers, and have sparked quite a debate among parents and netizens in China.

• High schoolers in Grade 10 and 11 will now get 2 days off per week, and Grade 12 students get to have 1 day off every week.
• Currently, there is no weekend for many high schoolers in China (the “higher ranking” a school, the tougher the routine), you get half a day off per week (~2 days off per month).
• A typical high school day looks like this: wakes up at 6am, arrives at class room at 7am, starts morning self-study routine, sits through the classes, stays for the evening self-study session, gets home at around 10pm, and if you’re lucky, gets to bed at around 12am. Rinse and repeat every day.
• As anticipated, many parents are not happy with the new policy: the gaokao (national unified exam) is so competitive that even a 1-point difference in scoring can make or break your chances of getting into university. Some parents in Hangzhou are worried that their kids might be disadvantaged if kids from the other cities don’t have as many days off.
• This has led to an explosive demand for private tuition on the weekends as parents send their kids to tuition classes instead. Previously, tuition was part of the school program and parents pay ~1000 yuan per semester. Now they have to pay an additional 1000-2000 yuan per month.
• Some private tuition companies have seen the business opportunity and have begun advertising “weekend packages” for parents, with such slogans as “you can go to work with a peace of mind. we will take over the duty of the school to take care of your kids instead.”
• One such “weekend package” as reported by the news which includes tuition for 6 subjects + physical education costs 3680 yuan per month, which is 47% of the monthly income for an average household.
• Some parents are now petitioning for the schools to keep their libraries open on the weekend and crowdfunding to pay for the teachers’ “weekend overtime fee”.
• Even more absurdity ensued, as some schools received “letters to volunteer to return to school on the weekends” by “very concerned” students.

China can be a magical place sometimes. The level of extreme competition has intensified in recent years to such an extent that it is taking a toll on everyone’s daily lives, and I don’t blame the people who want to emigrate to Western countries at all. I know many Chinese immigrants overseas who don’t want to put their kids through this.

Boy Boy just came out with a video where they interviewed an Australian who was tortured repeatedly removed, waterboarded, electric shocked to face and genitals, etc) for six months by the CIA at various US black sites all over the world including Guantanamo Bay. He said the Australian Ambassador to Pakistan was even present at one of the times he was tortured! https://youtu.be/xEqrm9OIqro

what the fuck. He said he saw other captives completely lose their minds and weren't able to recall their own names. They accused him of training the 9/11 hijackers with kungfu which he was a practitioner of.

Linking to locked thread as a new thread is excellence.

also kallas saying openly "how can we defeat china" is some next level of diplomacy, too bad everybody has humiliation fetish

Two Alawite families that my mom knows from her university days have been killed in Baniyas. She's in a facebook group with her old classmates and it's just full of obituaries of old people that have been mercilessly slaughtered by the terrorists. I don't know what to say, death just surrounds my people from all angles.

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Hasan banned (or just suspended?) from Twitch for saying “if you care about Medicaid fraud you should kill Rick Scott”. Don’t know yet how long the ban is but I’ll update with an edit when I see it.

https://xcancel.com/hasanthehun/status/1896633995661922675#m