EU-RUSSIA: FMs Hold Call On Peace Deal; Merz Says Use Frozen Russian Assets
European Commission President Ursula von der Leyen has been addressing the European Parliament on the draft Ukraine peace deals being negotiated. Says that the EU welcomes Trump's efforts to seek peace. Says "much more effort is needed, but we have a starting point". VdL: "Any agreement should deliver a just and lasting peace, and it should ensure real security for Ukraine and Europe." VdL: "If today we legitimise and formalise the undermining of borders, we open the doors for more wars tomorrow."
- An informal videoconference meeting of Foreign Affairs ministers takes place at 11:30CET (05:30ET, 10:30GMT). Politico reports the call comes "...as an attempt to reinsert the EU’s top diplomat Kaja Kallas into a debate from which she had been visibly sidelined. [...] it was [...] the chiefs of staff to von der Leyen and Council President António Costa [...], who huddled in Geneva Sunday to discuss Trump’s peace plan with Ukrainian, American, French, German and British officials — not Kallas."
- Separately, speaking in the Bundestag, German Chancellor Friedrich Merz says that "Germany will continue supporting the Ukrainian people and will use frozen Russian assets for that purpose". Merz: "Putin must accept there is no option of leaving this conflict successfully."
- Merz's confidence in using frozen Russian assets held in the EU may be misplaced, given that Belgium has given no clear indication it is willing to back such a move. Even the agreement of a federal budget by the De Wever gov't, combined with US pressure to utilise the funds, has done little to progress the issue ahead of the late-Dec EUCO summit.
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GERMAN DATA: IFO Expectations Stand At Highest Since February 2022 In October
Germany's IFO Business Climate Index outperformed expectations in October at 88.4 (88.0 consensus, 87.7 prior), with the expectations component of the release continuing its mid-term uptrend for its highest reading since February 2022 (91.6 Oct vs 90.0 cons; 89.7 prior). Despite this being a positive sign and expectations having trended up for some months now, it is still not being reflected in continuously soft "current situation" readings (85.3 Oct vs 86.0 cons; 85.7 prior) which mirror weak hard data from the country. Across sectors, services matched Friday's flash PMI release, seeing a notable uptick, but also manufacturing fared better than before according to IFO. Overall, "the German economy continues to hope for an economic upturn in the coming year", IFO comments.
- Across sectors, from the press release:
- In manufacturing, the index rose. Expectations in particular brightened. However, companies were less satisfied with current business. The decline in new orders has come to a halt. Capacity utilization rose by one percentage point to 78.2 percent, but remains well below the long-term average of 83.3 percent.
- In the service sector, the climate improved significantly. Service providers were less skeptical about the coming months. The current situation was revised slightly upward. Sentiment in tourism and IT services improved in particular.
- In trade, the business climate brightened. This was due to less pessimistic expectations, particularly in wholesale. However, the current situation was assessed as somewhat worse.
- In construction, the index declined slightly. While the current situation was assessed as noticeably better, expectations were more pessimistic. A lack of orders remains a key problem for the industry.
MONTH-END EXTENSIONS: Large Extensions for the UK
MONTH END EXTENSION: Large for the UK.
Bloomberg Bonds:
- US Tsys: +0.06yr (small).
- EU Govies: +0.08yr (average).
- UK Govies: +0.16yr (large, 0.18yr is October historical high).
MS Bonds:
- US Tsys: +0.03yr (small).
- EU Govies: +0.05yr (small).
- UK Govies: +0.13yr (large).
MNI: GERMANY OCT IFO BUSINESS CLIMATE INDEX 88.4
- MNI: GERMANY OCT IFO BUSINESS CLIMATE INDEX 88.4
