Good morning,

Markets are flat this morning before the ECB meeting this afternoon. The majority of analysts are not expecting Mario Draghi to announce a US form of quantitative easing. We have to wait and see what the ECB will come up with especially since he disappointed markets in his last meeting. Having said this, the Euro Stoxx 50 is up 7.5% from their lowest point this year mid-way through October. This tells you that investors are counting on some positive news from the ECB.

Draghi’s actions will dictate the tone of the European markets till year end. There has been increased optimism by the market for action by the ECB after the European Commission cut its growth forecasts for the Eurozone – this time including Germany. In May, the commission predicted growth in German gross domestic product of just 2% next year. This has been halved, to a little more than 1%, the same dismal rate that the forecasters now expect for the euro area as a whole. As the German economy deteriorates, growth in the U.S. and the U.K. continues to improve.

The Commission also reduced inflation figures for the Eurozone. It now expects prices to rise by 0.5% this year and 0.8% next year compared with its previous forecasts of 0.8% and 1.2 %. The European Central Bank's inflation target of "below, but close to, 2%" is slipping further out of sight.

In this pessimism, there might just be grounds for optimism. The projections make plain the true character of Europe's economic malaise. It's no longer (if it ever was) a question of a debt-burdened periphery dragging down an otherwise healthy core of modern, well-run economies. The forecasts confirm that the rot has spread not just to the core but also to the core of the core: Germany. Europe's largest economy now has more incentive than ever to help revive the larger European economy.

This combination of slow growth and persistently low inflation is dangerously self-reinforcing, because it keeps debt-to-GDP ratios high across the whole euro area. This depresses confidence even further, which puts additional downward pressure on demand. Investment spending in Europe has been especially hard hit including, again, in Germany.

It's one thing for Germany to lecture Greece, Italy, Portugal and Spain on the need for more responsible economic policies from a position of economic strength. It's quite another to issue instructions when the German economy is failing, too. In addition, Germany has the fiscal capacity to spur demand with tax cuts and higher public spending. The best policy for the whole euro area has long been obvious, and it's now increasingly clear that it makes sense for Germany itself.

In corporate news, Adidas AG reported third-quarter profit that beat analysts’ reduced estimates as the company made strides in soccer and running sales, helping offset declining revenue at its golf business. Chief Executive Officer Herbert Hainer is under pressure to turn the company around after earlier this year scrapping sales and profit targets for 2015 and abandoning the 2014 earnings goal as well. Nike Inc. is taking share in the U.S. and encroaching on Adidas’s home turf in Europe, while the market for golf equipment is slumping.

Tesla Motors Inc. projected a surge in orders for its Model S and said it’s accelerating production of the plug-in electric car, sparking a gain in the shares. The company projects 50,000 Model S sales in 2015. Making that many “will be no problem,” Chief Executive Officer Elon Musk said yesterday on a conference call with analysts. Tesla raised its outlook to making more than 2,000 vehicles a week by

the end of next year.

Siemens AG reported a 28 percent rise in quarterly profit and announced a 2.2 billion-euro sale of its hearing-aids unit as Europe’s largest engineering company focuses on its energy business. The profit rise helped Chief Executive Officer Joe Kaeser, who took over in August last year, to meet the company’s full-year targets, in contrast to predecessor Peter Loescher, who had to cut earnings forecasts five times in six years. The sale of the hearing-aids unit will help fund the 6.8 billion euros Kaeser spent to buy Rolls Royce Group Plc’s energy assets and Dresser-Rand Group Inc. to bolster the offerings of the German engineering giant to the booming U.S. shale gas industry.

Good day and happy trading!

Kristian Camenzuli