The European Central Bank has warned that the risk of the Eurozone economy slowing down has moved to the downside as a result of global trade tensions, Brexit, financial market volatility and the threat of protectionism. The PMI data from the region was disappointing, with both Germany and France’s manufacturing sector falling into contraction, and whilst the ECB has left policy unchanged, its tone was sombre. It is not the only Central Bank citing political uncertainty for softer growth, The Federal Reserve has issued a similar message and expects fewer rate rises this year.
The UK labour market has demonstrated incredible resilience to the continued Brexit-related uncertainty. Official data has shown that employment reached its highest recorded level at the end of 2018, while total pay grew at its fastest pace for a decade. This, combined with depressed consumer price inflation is improving the living standards of UK consumers. One might expect that this would lead to wage inflation which might tempt the Bank of England to raise interest rates, however, it remains paralysed by the Brexit negotiations.
In the US, President Trump still wants a wall, while the Democrats do not. As such, the government remains in shutdown. Trade discussions with China are ongoing, with one month remaining to strike a deal or face an escalation of tariffs. This international issue has contributed to China’s domestic woes as, earlier this week, data showed that their economic growth had slowed to its slowest annual rate in three decades. Following this announcement, China’s Vice-President has insisted that sustainable growth would be maintained and that growth of 6.6% was still a ‘pretty significant number’!
Markets in a minute
- The FTSE 100 is down 2% this week.
- The 10 year Gilt yield has fallen to 1.26%.
- After a turbulent period, EasyJet shares propelled up 6% following a trading update which signalled robust demand.
- Airbus CEO Tom Enders has warned that the future of the company is at stake if Britain crashes out of the E.U.
- Pets at Home has been a stock market dog for a while but results this week saw the shares rise 16%.
- Shareholders in Metro Bank were left feeling robbed on Wednesday as an unscheduled statement from the regulator sent shares down c. 40%.
- Starbucks have espresso’d their Chinese expansion plans despite concerns of an economic slowdown.
- Fevertree shares popped c.6% after a sparkling set of results, abating concerns of its growth potential.