Daily Brief – Copernicus

Copernicus

No, we are not referring to the Polish polymath of the same name known as the father of modern astronomy but to the EU’s Earth observation program. What Copernicus is telling us is that the EU is heating up much faster than almost any region on the planet and whereas in 2018 the EU consumed 40 thousand TJ or Terajoules a year in energy for cooling, that number doubled six years later in 2024. Part of that increase is down to some countries adopting air conditioning due to their newfound prosperity as EU members plus other countries rolling out air conditioning more widely in response to much hotter weather. Austria for example increased from 23 to 253 TJ. Italy is the largest consumer of energy for cooling at 26 thousand TJ with Spain in second place at 14 thousand TJ. While food inflation has tapered in the EU, supermarkets are anticipating that food prices will be on the march again next year as damaged and scarcer crops due to much higher temperatures and droughts feed through to shelf prices in the shops.

EUR/USD 1.1449.

Non-Financial EU Corporate Debt

The EU has what is called the 85% rule which is the proportion of corporate debt to a country’s GDP where percentages over 85% flag a warning. Corporate debt includes bank loans and corporate bond offerings but does not include the debt of financial institutions, banks, and insurers. Luxembourg for example has a figure of 250% but that is because it hosts thousands of foreign owned holding companies whose debt is matched with assets. Belgium and France both score 90%+ while Netherlands, Cyprus, Sweden, and Denmark are between 100% and 115%. Surprisingly, Italy and Greece are 50% because their debt is concentrated in the public sector rather than the private sector. While 85% does not necessarily signal financial distress it does flag potential economic vulnerability unless there are technical reasons for such a level of corporate debt.

EUR/JPY 185.89.

China

In Q2 China’s economy year on year grew 4.3% down from 5% in Q1 and the slowest since post pandemic Q4 2022. The reason for that is China’s economy is slowing and, some claim becoming increasingly unbalanced, due to its government focusing on frontier tech such as AI and robotics plus a weaker housing market. The 2026 full year target is for growth of between 4.5% and 5% down from 5% in 2025. Having seemingly largely overcome feared downward pressure on growth due to higher energy prices but still lower, China continues to enjoy economic growth that puts the rest of the world with overall 3% growth in the shade.

GBP/USD 1.3505.

Chipotle Mexican Grill

With 4,100 outlets worldwide, Chipotle are beating a well-worn path albeit a disastrous one by foreign chains of taking their food offering to its country of origin by opening a Mexican restaurant in Mexico. Not at all put off by Taco Bell spectacularly failing in Mexico not once but twice, Chipotle will be offering tacos, burritos and bowls to what appears to be a sceptical Mexican market at least according to posts on X. Caramba!

EUR/GBP 0.8476.

Fame!

This day in 1982 Irene Cara was at Number 1 in the UK singles charts with the song of the same name as the hit TV series about a NY drama school in which she played the role of Coco Fernandez. The plot line was wafer thin, but in 1982 it was all impossibly glamorous to UK audiences as the boys and girls of Fame jumped, danced around and sang the theme song all dressed in leotards.

Baby, look at me and tell me what you see
You ain’t seen the best of me yet
Give me time, I’ll make you forget the rest
I got more in me and you can set it free
I can catch the moon in my hand
Don’t you know who I am?
Remember my name
(Fame)
I’m gonna live forever
I’m gonna learn how to fly
(High)
I feel it coming together
People will see me and cry
(Fame)
I’m gonna make it to heaven
Light up the sky like a flame
(Fame)

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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