Daily Brief – EU Spend versus Canada

EU Spend versus Canada

While there are differences by country this is how EU governments spend public money raised through taxation revenues: 40% goes on social protection which covers unemployment and old age but also parental care, sickness, health and disability, loss of a spouse or parent, housing and social exclusion; 15% goes on healthcare; 12.$5 for social services; 10.8% on economic affairs; 9.7% on education; 3.5% on public order; 3% on defence; 2.4% on religion, culture and recreation; 1.7% on environmental protection and 1.5% on housing and communities. In case you are wondering the total of EU public spending is EUR 9.3 trillion per annum.
Canada spends differently: 25% on social protection; 24% on healthcare; 15% on general public services and debt; 12% on education; 9% on economic affairs; 6% on defence; 9% on environmental protection and other services. The total of Canada’s public spending is CAD 1.14 trillion or EUR 0.71trillion per annum. Not so much a question of the quantum as the difference in mindset when it comes to spending means that while the EU and Canada are making nice this week in the face of that unreliable American boyfriend’s behaviour, there is quite a bit to iron out when it comes to exactly what being an Associate EU Member might entail for Canada.

EUR/USD 1.1477

France

Mon dieu, it is now costing France more to borrow in debt markets than Greece! Not much maybe, but government debt for France costs 4.5% and Greece 4.28%. France is 10 times bigger than Greece, richer and more diversified but that is not the whole story: markets are looking at whether France has the appetite as well as the political ability to reduce its debt, the growth of its debt and the re-financing frequency of its debt. On all those grounds, Greece scores above France and has form in austerity on a scale unimaginable in France when it bit the bullet in 2012 and borrowed long. What all this points to is that France’s debt mountain will continue to grow and the cost to France of refinancing it will rise as markets demand a higher premium to do so.

EUR/GBP 0.8581

Gold

In this environment of a hawkish Federal Reserve rate hike and falling oil prices, where is gold going? Before we come to that it is worth saying that while at present despite the economically challenged POTUS calling for “1% US interest rates or lower“ a further rate hike is pencilled in for November to combat inflation fuelled by high oil prices. This week’s Brent Oil price drop and currently USD102.60 is predicated by Saudi Arabia offering ship to ship crude oil transfers to Asian refiners off the Omani port of Sohar. While the market has taken comfort from that work around, it seems over optimistic to assume that the Houthis have gone away and that US Treasury Secretary Bessent’s assurances of no longer managing but ending the Iran conflict have more substance than his previous confident assertions in the same vein. Back to Gold: it has steadied but in terms of direction it remains range bound.

Gold USD 4380.60

Bank of England

Going into yesterday’s MPC meeting release the expectation was for interest rates to be held with the likelihood that the market would see a hike in November. To some this seemed to be an occasion when in a rising rate environment in the USA most recently as well as the EU, the BoE would take the opportunity to get on top of inflation. In the event it was no change with the BoE citing a stronger economy which might well have been an argument to raise rates but not this time.

GBP/USD 1.3374

Play that Funky Music

This day in 1976 a quintet from Steubenville, Ohio USA named Wild Cherry after a brand of cough sweets which, despite this unpromising start, scored one of five Number Ones with this number.

Hey, do it now

Hey, once I was a boogie singer
Playin’ in a rock-and-roll band
I never had no problems
Burnin’ down the one-night stands

And everything around me
Got to start to feelin’ so low
And I decided quickly
Yes, I did
To disco down and check out the show

Yeah they were dancin’ and singin’
And movin’ to the groovin’
And just when it hit me
Somebody turned around and shouted

“Play that funky music, white boy
Play that funky music right
Play that funky music, white boy
Lay down that boogie
And play that funky music ’til you die.”

‘Til you die?

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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