GERMAN DATA: Q2 GDP Expenditure Split Highlights Weakness
Germany's final Q2 GDP growth figures were downwardly revised by 0.2pp, at -0.3% Q/Q (-0.1% flash, 0.3% Q1). "In June 2025 output in manufacturing and in the construction industry, in particular, was worse than expected. In addition, household final consumption expenditure for the 2nd quarter of 2025 has been revised downwards due to new information available on the services sectors", Destatis comments on drivers for the revision.
Underlying drivers point towards a weak print, with lower investment, while government expenditures contributed positively. Higher imports dragged on the external sector balance. On a split by expenditure categories:
- Private consumption 0.1% Q/Q vs 0.2% cons, 0.6% Q1: Monthly statistics on "accommodation and food services for June 2025" were one driver behind a print lower than expected by Destatis previously.
- Government spending 0.8% Q/Q vs 0.3% cons; -0.3% Q1: Underpinned the overall print strongly, and the expectation is that this remains firm going ahead following the government's fiscal easing package.
- Investment excl. inventories: -1.4% Q/Q vs -0.8% cons, 0.3% Q1: A worrying Q2 print. A recent private sector initiative should be seen as a marginal net positive looking ahead here. The government flagged it is currently working on wide-ranging structural reforms which are thought to foster this going forward - updates are expected for autumn.
- Exports -0.1% Q/Q vs 2.5% Q1: Appear to be holding up pretty well following the strong Q1 underpinned by US tariff front-running. "This was due to a drop in exports of goods (-0.6%), while exports of services rose by 1.4%", Destatis commented on drivers here. IFO export expectations have been on an uptrend recently, now printing roughly neutral.
- Imports 1.6% Q/Q vs 1.6% Q1: Those were the driver behind a -0.7pp contribution to headline Q/Q from net exports. We noted a potential for a downward revision to Q2 GDP following June's trade data, which saw heavy decreases in net exports to the US.
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STIR: BoE Pricing Little Changed, Just Under 50bp Cuts Through Dec
FI bearish drivers outlined elsewhere (Japan-U.S. trade deal, weak 40-Year JGB auction & questions surrounding Japanese PM Ishiba’s future) apply very modest hawkish pressure to GBP STIRs.
- BoE-dated OIS little changed to 0.5bp more hawkish through year-end, showing 90% odds of a cut for next month, 26.5bp through September, 42.5bp through November and 49bp through year-end.
- SONIA futures flat to -2.5.
- Little of note on the UK macro calendar today, which will leave cross-market impulses at the fore.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 3.991 | -22.6 |
Sep-25 | 3.952 | -26.5 |
Nov-25 | 3.794 | -42.4 |
Dec-25 | 3.724 | -49.3 |
Feb-26 | 3.606 | -61.1 |
Mar-26 | 3.574 | -64.4 |
GILT AUCTION PREVIEW: 4.375% Jan-40 gilt auction preview
- The DMO will return to the market today to hold a short 15-year gilt auction of the 4.375% Jan-40 gilt for GBP3.0bln nominal.
- This is a slightly smaller auction size than seen in the three prior auctions (which were all GBP3.25bln). Bid-to-covers have generally been strong ranging from 2.58-2.89x at these auctions with tails ranging from 0.6-1.0bp (1.0bp at the latest auction).
- Given the strength of Monday's long-dated APF sales operation, we would expect today's auction to be digested smoothly.
- RBC write that "we very much like buying the 4r40s [4.375% Jan-40 gilt] on tight and broader RV structures with the bond/sector looking cheap and there being fundamental reasons for both to perform in coming weeks". They "continue to look for curve steepening and hence would only want to buy the 4r40s vs longer maturity gilts on switch". RBC "favour being tactically long UK ASWs here into the seasonal gilt summer supply hiatus (up to end of August) with long 15y ASW quite an attractive expression of this".
- Finally, they note that "the 31st July conventional gilt coupon paying bonds go ex-div today and which will see c.£4.5bn cash proceeds paid to private investors should be particularly supportive of the 15y sector and 4r40s".
EQUITY TECHS: E-MINI S&P: (U5) Northbound
- RES 4: 6439.88 1.500 proj of the May 23 - Jun 11 - 23 price swing
- RES 3: 6402.44 1.382 proj of the May 23 - Jun 11 - 23 price swing
- RES 2: 6381.50 1.764 proj of the Apr 7 - 10 - 21 price swing
- RES 1: 6374.00 High Jul 21
- PRICE: 6361.25 @ 07:25 BST Jul 23
- SUP 1: 6288.25 Low Jul 17
- SUP 2: 6264.70/6120.59 20- and 50-day EMA values
- SUP 3: 6075.25 Low Jun 24
- SUP 4: 5959.00 Low Jun 23
S&P E-Minis traded to a fresh cycle high Monday. The climb confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position highlighting a clear dominant uptrend. Sights are on 6381.50, a Fibonacci projection. Key support is at the 50-day EMA, at 6120.59. Support at the 20-day EMA is at 6264.70.
