LIVE MARKETS-Germany's fiscal overhaul could buffer euro zone if US tariffs materialise - UBS
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GERMANY'S FISCAL OVERHAUL COULD BUFFER EUROZONE IF US TARIFFS MATERIALISE - UBS
The recently announced spending plans and borrowing overhaul by the new German government could help offset potential headwinds to the euro zone economy if the U.S. slaps on tariffs, says Mark Haefele, global wealth management CIO at UBS.
Frankfurt's DAX is at another record high today, following Wednesday's news that Germany will drastically shift spending to revamp the military and revive growth, including a 500 billion euro infrastructure fund and an overhaul to borrowing rules.
The proposed package still needs approval by the German Bundestag, but Haefele thinks the scale of the fiscal boost could lift confidence, even before the extra spending filters into the economy.
"If this package passes, government spending could increase by around a cumulative 20% of GDP over the coming decade. It would also be the biggest fiscal shift in 80 years, surpassing even spending related to the reunification of Germany in the 1990s," he wrote in a daily note.
He said the announcement places upside risks to his team's growth forecasts for Germany, and for Europe more broadly.
"It could also help offset potential headwinds to the euro zone economy in the event of higher tariffs from the US," he said.
Higher spending might also add to an already improving backdrop for equities.
Germany's DAX .GDAXI is up 16.5% YTD according to LSEG Workspace, while the STOXX 600 .STOXX has clocked a 9.6% gain.
"Despite this recent rally, German and European equities remain inexpensive in relative terms, with multiple catalysts on the horizon," Haefele says.
(Lucy Raitano)
FOR THURSDAYS OTHER LIVE MARKETS POSTS
LUXURY: ARE WE OUT OF THE WOODS? CLICK HERE
STOXX SLIPS DESPITE MODERATING TARIFF FEARS AND POSITIVE EARNINGS CLICK HERE
EUROPE BEFORE THE BELL: FUTURES UP AS TARIFF TENSIONS EASE CLICK HERE
ECB'S LAST EASY DECISION CLICK HERE
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