GERMANY: Merz's CDU Regains Top Spot After Shock AfD Lead Poll
Following a shock opinion poll from Forsa published earlier in the week, in which the far-right Alternative for Germany (AfD) recorded its joint-highest level of support on record, the trend has reverted to the norm, showing the AfD in second place behind Chancellor Friedrich Merz's centre-right Christian Democratic Union (CDU). All three polls posted after the Forsa poll had the CDU in first place, with the AfD in second and the junior coalition partner, the centre-left Social Democrats (SPD), third.
- The next federal election is not due until 2029, but that is not to say current polling and gov't support will not play a significant role in German policy making or affect gov't stability.
- Should the AfD develop a consistent polling lead over the CDU, it could lead to increased pressure on Merz from the conservative wing of the party to swing to the right to counter AfD gains. This trend has been seen in France and the UK, where both gov'ts have sought to talk tough on immigration to try and wrest control back from right-wing parties currently topping the polls.
- In contrast to both France and the UK, the German gov't comprises both the centre-right and centre-left. A hardline shift to the right by the CDU could damage (already tepid) relations with the SPD, risking policy paralysis or public acrimony. Both issues plagued the previous 'traffic light' coalition of Olaf Scholz and contributed to its early collapse.
Chart 1. Federal Election Opinion Polling, % and 3-Poll Moving Average
Source: Forsa, INSA, YouGov, Verian, FGW, Allensbach, Infratest dimap, pollytix, MNI
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EQUITIES: Bank of America Macro Takeaways:
- "2Q NET INTEREST INCOME FTE $14.82B, EST. $14.84B - bbg
- 2Q NET INTEREST INCOME $14.67B, EST. $14.59B
- 2Q LOANS $1.15T, EST. $1.12T
- 2Q NET CHARGE-OFFS $1.53B, EST. $1.5B
- 2Q TRADING REVENUE EX. DVA $5.38B, EST. $4.94B"
- Markets: Record Q2 sales and trading revs, record Q2 equities sales and trading revs
- Consumer side: YTD consumer payment spend is up 4% Y/Y at $2.3tr
- Sectoral spending, they see increases in both volumes and transactions for travel & entertainment, food, retail and services (T&E, Services rising the fastest) however spending on gas declined by 6% in $ terms, on flat transaction numbers.
- Residential mortgage loans rose for the first time in 5 quarters, up to $118bln from $115bln in the prior quarter. Credit card and vehicle lending was broadly flat
US TSYS: Broadly Consolidating Yesterday’s CPI-Induced Breach Of TYA Support
- Treasuries trade modestly twist flatter on the day although broadly speaking consolidate yesterday’s sell-off on the June CPI report with its signs of increased tariff passthrough.
- Treasuries outperform Gilts across the curve owing to stronger than expected UK CPI, whilst they underperform EGBs at the front end but track in line further out the curve.
- Cash yields are 0.7bp higher (2s) to 1.8bp lower (30s).
- The 10Y yield, currently at 4.473%, saw an overnight high of 4.493%, having last cleared 4.50% on Jun 11.
- TYU5 trades at 110-11+ (+ 02+) on solid cumulative volumes of 375k, albeit keeping to narrowing ranges of 110-08+ to 110-13+.
- It consolidates yesterday’s push lower to that 110-08+, seen multiple times since then, in a move that breached an important support at 110-17 (61.8% of May 22 – Jul 1 bull leg). It has also traded through trendline support at 110-23+, strengthening a bearish theme and opening 110-03 (76.4% retrace of the same bull leg).
- Data: MBA mortgage applications (0700ET), PPI Jun (0830ET), NY Fed services Jul (0830ET), IP/Cap util Jun (0915ET)
- Fedspeak: Barkin repeats speech (0830ET, text + Q&A), Hammack on community development (0915ET, text only), Gov. Barr on financial regulation (1000ET, text + Q&A), Beige Book (1400ET), Bostic on fox business network (1530ET), NY Fed's Williams on economic outlook and policy (1830ET, text + Q&A).
- Bill issuance: US Tsy to sell $65bn 17-W bills (1130ET)
EQUITIES: Big Banks Still Dominating Earnings Schedule; MS, BofA & GS All Due
Awaiting results from Bank of America in around 10 minutes times - continuing the theme of big bank earnings that should dominate this week. Highlights today include:
- 1145BST/0645ET: Bank of America
- 1230BST/0730ET: Morgan Stanley, Goldman Sachs
- Pre-Market: Prologis, Progressive Corp
- After-Market: United Airlines
Our full schedule including timings, EPS and revenue estimates here: https://media.marketnews.com/MNIUSEARNINGS_110725_c282a28044.pdf
