By Marc Chandler
Look at the turn around in the current account. In the 12-months through July, the euro area recorded a seasonally adjusted cumulative current account surplus of almost 63 bln euros, which is about 0.7% of the region’s GDP. The comparable figure in the 12-months through July 2011 was a deficit of a little more than 22 bln euros….
The weakness of the euro area economies has slowed imports and several countries, including some in the periphery, have seen a pick up in exports. Growth differentials probably is the more significant explanation, but we do recognize that from last November through July, the euro had declined about 10% on a trade-weighted basis……
While the current account is intuitively clear, the financial account is surprising. As the euro was falling in July to multi-year lows, talk circulated of capital flight. Yet, the financial account showed a net inflow of 18 bln euros of combined portfolio and direct investment.
via Europe’s Balance of Payments account shows sizeable portfolio inflow.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.