Finally, the UK¡¯s FTSE 100 has closed down 0.6%, or 43 points, at 7,409.
Europe did better, despite today¡¯s unimpressive growth report. The Stoxx 690 has finished the day flat (rather like Germany¡¯s GDP...).
Have a lovely weekend. GW
The eurozone will probably struggle to grow in the current quarter, reckons Greg Daco of Oxford Economics.
He predicts that the mere 0.1% growth reported in October-December will be repeated in January-March, with coronavirus restrictions hurting the economy.
If you¡¯re just tuning in, here¡¯s the AFP newswire¡¯s take on today¡¯s German growth figures:
Hopes pale for German growth rebound after late 2019 flatline
Europe¡¯s largest economy Germany marked time in the fourth quarter of 2019 as its export-oriented industry¡¯s woes continued to weigh on growth, official data showed Friday.
Gross domestic product (GDP) was flat quarter-on-quarter in October-December, federal statistics authority Destatis said, disappointing the agency¡¯s own expectations and those of analysts surveyed by Factset.
The statisticians also revised their third quarter growth figures, saying that GDP had added 0.2% rather than 0.1%.
Over the whole year, the annual growth rate of 0.6% was Germany¡¯s worst since 2013.
The economy ¡°remains in a weak phase,¡± the economy ministry in Berlin said, highlighting ¡°very weak¡± industrial production and incoming orders for manufacturing firms towards the end of the year.
After a surge in 2017-18, Germany¡¯s export-oriented economy has been sapped since late 2018 by trade conflicts and other sources of uncertainty, including Brexit and slower growth in emerging economies.
For some analysts, that meant simply avoiding a second quarter of shrinkage in 2019 after the contraction in April-June was worth celebrating.
¡°Overall economic stagnation in the fourth quarter is already a small success¡± given that industrial output shrank strongly, said Dr. Fritzi Koehler-Geib, chief economist at KfW banking group.
Industry continues to suffer, with production shrinking sharply in December, Destatis data showed.
Meanwhile, ¡°private and state consumer spending lost significant momentum after a strong third quarter,¡± the statisticians added.
Supported by unemployment close to historic lows and gradually rising public spending, consumption had been an important buttress to economic activity in Germany compensating for ailing industry.
Looking ahead into 2020, the rebound many observers were hoping for in the first half of the year will likely be pushed back by the effects of the novel coronavirus COVID-19.
¡°The German economy¡¯s performance in the first quarter will largely depend on how the coronavirus affects the Chinese economy, and German exports to China,¡± Commerzbank economist Joerg Kraemer said.
Goods sold to China account for around three percent of German GDP, Oddo bank analysts noted.
But there are challenges to Europe¡¯s powerhouse beyond the cyclical slowdown.
¡°The manufacturing sector remains caught between cyclical weakness, on the back of the trade conflict and weaker global growth, and structural weakness, on the back of disruption in the automotive sector and too little investment,¡± said ING bank economist Carsten Brzeski.
In the coming months, the country has little to look forward to but ¡°stagnation, with a risk of a technical recession,¡± he added.
Fancy some afternoon reading? Here¡¯s a fascinating thread from Sky News¡¯s Ed Conway about UK statistics, and how a mysterious gold transaction flattered Britain¡¯s trade data:
The US stock market has opened gently, with the Dow Jones industrial average up 33 points or 0.1% at 29,456.
That¡¯s despite a 0.1% drop in US factory output last month, as Boeing¡¯s 737 Max crisis hits.
With stock markets at record highs, Universal Music wants to join the party with an IPO:
Here¡¯s our story about Tesco illegally blocking its rivals from opening stores:
Wall Street is expected to post fresh gains today, despite the uncertainty created by Covid-19.
Mihir Kapadia, the CEO of Sun Global Investments, says:
¡°With the coronavirus death total now reaching 1,000 and looking likely to go much higher, Asian shares have nevertheless followed yesterday¡¯s Wall Street rally as factories begin to re-open across China.
Asia-Pacific shares outside Japan rose 0.9%, with Shanghai blue chips gathering momentum by reaching 0.8%. The Japanese Nikkei market was closed due to a public holiday. In Europe, stocks are also higher the FTSE up 0.7%.
Although markets are higher , investors will likely remain concerned about the impact of the coronavirus on the global economy. After 18-months of the trade dispute wreaking havoc on the markets and China, the coronavirus outbreak has been an additional source of concern, though markets are remarkably resilient for now.¡±
For days, investors have been fluctuating between panicking about the coronavirus, and persuading themselves that the crisis is abating.
Today they¡¯re in a calm mood, pushing stocks in Europe up to new record highs.
The Stoxx 600 index has gained 0.15% to a fresh peak, after China reported that some deaths have been ¡®double-counted¡¯. This has reassured traders, who hit the sell button yesterday after a big spike in cases.
But new cases keep cropping up around the world, including a Channel 4 employee in London:
Regulator: Tesco unlawfully blocked rivals
Back in the UK, supermarket chain Tesco has been blasted by regulators for unlawfully blocking its rivals from opening stores.
The Competition and Markets Authority has announced that Tesco has pledged to stop using covenants and exclusivity arrangements to prevent landlords letting sites to other supermarkets.
A review has found 23 separate agreement of this type, which has been illegal since 2010.
Andrea Gomes da Silva, Executive Director, Markets and Mergers at the CMA, says:
It¡¯s unacceptable that Tesco had these unlawful restrictions in place for up to a decade. By making it harder for other supermarkets to open stores next to its branches, shoppers could have lost out.
In the future, we want the ability to fine businesses if we find that they are in breach of our orders. That¡¯s why we¡¯ve called on the Government for more powers.
The CMA is also asking other supermarkets to check whether they have used similar anti-competitive restrictions.
PwC: Peripheral Eurozone economies come back fighting
Back in the debt crisis, some of Europe¡¯s smaller countries were the black sheep of the euro-flock. Today, these peripheral nations are driving growth, as France and Italy shrink and Germany stagnates.
Barret Kupelian, senior economist at PwC, says the periphery are the euro area¡¯s bright spot:
¡°Today¡¯s country breakdown of Eurozone¡¯s GDP growth showed us that the bloc grew by 1.2% in 2019. This rate of expansion is comparable to that of the UK. The US economy, however, grew by 2.3% in 2019, which is around double the rate of the Eurozone and the UK¡±
The Eurozone performance can be mainly explained by the poor performance of Germany and Italy, which are its biggest and third largest economies respectively. Size matters when it comes to GDP growth rates - a one percentage point increase in the growth rate of Germany and Italy increases Eurozone GDP by 0.5 percentage points.¡±
¡°However, the bright spot in the Eurozone continues to lie in the peripheral economies. With the exception of Greece, all of the bailout economies have surpassed pre-crisis output levels and continue to grow at strong rates. In fact, we estimate that the three bailout economies (Spain, Portugal and Cyprus) which reported Q4 2019 output estimates today, grew by 0.6% quarter-on-quarter compared to virtually no growth in the German, French, Italian and Dutch economies in GDP weighted terms (see Figure below).¡±
Allianz: Is Germany a ¡°stranded¡± economy?
Germany¡¯s economy is unlikely to improve much this year, due to trade tensions, the shift away from petrol and diesel cars, and Brexit.
So argues Ludovic Subran and Katharina Uterm?hl, top economists at German insurance giant Allianz. They warn in a new report that Europe¡¯s largest member risks a ¡°stranded future¡±, unless it can strengthen its economy and become more competitive.
Here¡¯s the key points, kicking off on today¡¯s growth figures.
- Recession avoided in 2019, but no rebound on the cards for 2020. At +0.6%, about half the rate for the Eurozone as a whole, German GDP grew at the slowest pace since the region¡¯s sovereign debt crisis. We do not expect 2020 to bring much relief with GDP growth likely to slow marginally to a seasonally-adjusted +0.5%. Moreover the risk that Germany¡¯s ¡°golden¡± decade of uninterrupted economic growth ¨C the longest period of expansion since reunification ¨C will come to an end in 2020 remains on the table for now, given the cautious outlook for global trade and the automotive industry as well as lingering elevated political uncertainty over trade and Brexit.
- The subdued outlook for the German economy provides a glimpse of a ¡°stranded¡± future. Europe¡¯s economic powerhouse is struggling to keep up with structural change, putting it at risk of becoming a ¡°stranded economy¡± with its long-standing competitive advantage in industry and in particular the car sector becoming obsolete. While the German economy remains highly innovative, it is increasingly struggling to leverage its potential, given the lack of even a basic digital infrastructure, a growing digital skills gap and inadequate start-up funding.
- But a ¡°lost¡± decade for Germany is not a done deal, yet. What is needed is a significant long-term investment plan focused on upgrading infrastructure, updating the education system, boosting research & development capabilities and creating a venture fund to co-invest in promising start-ups. But solely throwing money at the problem is not the solution. Instead the German economy¡¯s digital catch-up initiative needs to be accompanied by a ¡°simplification shock¡° i.e. a notable reduction in red tape to allow for a better delivery of large-scale infrastructure projects, as well as to make life easier for corporates, particularly SMEs.
Andrew Kenningham of Capital Economics has told clients:
¡°We think the economy will continue to flirt with recession in the first half of this year.¡±
It¡¯s hard to put too much gloss on a stagnating economy, but the German government has tried to strike an optimistic-ish tone this morning.
Berlin¡¯s economy ministry says Germany¡¯s economy is going through a weak phase, but it¡¯s encouraged that business sentiment has improved.
But... the ministry also warns that the coronavirus outbreak means that the risks from overseas have increased, but it¡¯s hard to say what the impact will be.
More encouragingly, employment growth across the eurozone has risen.
The number of employed people rose by 0.3% in the euro area in the final quarter of 2019, and by 0.2% in the European Union. That¡¯s up from 0.1% in Q3.
This jobs creation has pulled the unemployment rate down to its lowest level since the financial crisis, which is clearly welcome -- but it¡¯s disappointing that it¡¯s not leading to faster growth.