GERMANY: Foriegn Minister's 5% Of GDP On Defence Support Irks Coalition Partners
May-16 11:17
Politico reports that Foreign Minister Johann Wadephul's comments on 15 May, stating his support for an overall 5% of GDP spend on defence, has irked some members of the centre-left Social Democrats (SPD), which sits as the junior partner to the centre-right Christian Democratic Union/Christian Social Union (CDU/CSU) from which Wadephul hails.
- Speaking at an informal meeting of NATO foreign ministers in Turkey, Wadephul said that the German gov't was "following" US President Donald Trump with regard to his push for NATO members to spend 5% of GDP equivalent on defence. Wadephul backed NATO Secretary-General Mark Rutte's compromise that an equivalent of 3.5% of GDP could go on "hard military spending", while an additional 1.5% could go on "related spending" such as infrastructure or cyber security.
- An SPD lawmaker speaking to Politico anonymously "said Wadephul’s announcement was “not wise,” arguing that the proposed 5 percent target is “not conceptually underpinned” and risks undermining the fragile consensus for higher defense spending." The lawmaker claims that the coalition parties had made a deal not to announce a spending target until the NATO summit in the Netherlands in late June.
- The comments from Wadephul would appear to align with Chancellor Freidrich Merz's pledge in his inaugural Bundestag speech as head of gov't that Germany's armed forces "need to become the strongest military in Europe in conventional terms".
- Germany spent 2.12% of GDP on defence in 2024, with Goldman Sachs forecasting this could rise to 3% by 2027 and 3.5% after that.
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US DATA: Mortgage Applications Pull Back, Likely More Volatility Ahead
Apr-16 11:15
US mortgage activity pulled back last week as mortgage rates unsurprisingly lurched higher again in response to higher swap rates. Expect more volatility ahead considering swings in US rate markets.
- Composite applications fell a seasonally adjusted -8.5% last week after jumping 20% the week prior.
- It was led by refis (-12.4% after 35.3%) whilst new purchase applications saw a less volatile version of the move (-4.9% after 9.2%).
- Relative levels: composite at 57% of 2019 average, new purchases 63% and refis 48%.
- The 30Y conforming rate increased 20bp to 6.81% after a 9bp decline the week prior to 6.61% for the lowest since Oct 2024 after a recent high of 7.09% in January.
- Expect further swings in mortgage activity ahead as volatility in rates markets continues. 10Y swap rates averaged 6bp higher last week than the week prior (3.67% vs 3.61%) but included a huge range of 3.32-3.96% last week which will have complicated mortgage deals. The 10Y swap rate is currently 3.77%.
OUTLOOK: Price Signal Summary - Gold Bulls remain In The Driver's Seat
Apr-16 11:03
- On the commodity front, today’s extension in Gold reinforces current bullish conditions. The yellow metal has traded to another fresh all-time high and confirmed a resumption of the primary uptrend. Note too that moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3347.67, the1.382 projection of the Dec 19 - Feb 24 - Feb 28 swing. Initial firm support lies at 3092.1, the 20-day EMA.
- 0In the oil space, a bearish theme in WTI futures remains intact and the rally on Apr 9 is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels, reinforcing a bearish threat. A resumption of the bear cycle would open $54.26, a 2.236 projection of the Feb 11 - Mar 5 - Apr 2 price swing. Initial firm resistance is seen at $64.85, the Mar 5 low and a recent breakout level.
EURIBOR OPTIONS: Call spread buyer
Apr-16 11:00
ERU5 98.25/98.50cs 1x2, bought for 2.5 in 3k.
