It is happening again! This morning’s shockinglybad economic data out of Europe is being treated as good news by the markets, with both equity and bond prices initially responding favorably to the news. This paradox is a repeat of yesterday, when markets also treated the bad news for Main Street -- disappointing U.S. retail sales numbers-- as good news for financial assets. And while strengthened expectations of greater central bank accommodation readily explain this apparent perversion, it should not also blind us to the fundamental drivers in play.
Let’s start with the three most notable aspects of this morning’s growth data released by Eurostat, the statistical unit of the European Commission.