There were more worrying signs from the eurozone yesterday, as German industrial output unexpectedly fell in November. It is the third consecutive month of declines, with figures showing output at German factories shrank by a whopping 1.9% month-on-month, when an increase of 0.3% had been expected. On an annual basis, output dropped by a staggering 4.7% in November, suggesting that growth figures for the final quarter of 2018 could be very weak. It is worth noting that two quarters of negative growth signal a technical recession, so future releases will be watched closely.
Several analysts reacted negatively to the news, suggesting that it looks as if Europe’s largest economy could post negative GDP growth when the figures for the fourth quarter of 2018 are released. On the other hand, other economists felt moved to point out that a technical recession is nothing to be too worried about, arguing that there should be solid industrial and investment activity throughout the year. As with all things of this nature, only time will tell and it makes for a fascinating 2019.
Stock markets around the world reacted positively to suggestions that Beijing and Washington are making progress in their trade negotiations, while sterling fell by almost half a percent against the dollar as investors took advantage of an early surge. Many moved to cut their positions as some volatility is expected this week as MPs debate Theresa May’s Brexit withdrawal agreement.
Trump delivered a TV address last night in which he stoked immigration fears and suggested that there was a ‘border crisis’. After declaring that he would be ‘proud’ to cause a government shutdown, Trump has gone on to blame everyone but him for the second longest shutdown in history. His comments were designed to pressure politicians to approve funding for a border wall – a central pledge of his campaigning. In response, the House speaker, Nancy Pelosi, and the Senate minority leader, Chuck Schumer accused the former reality TV star of manufacturing a crisis and said he must reopen the government.
The main release from today is the Federal Open Market Committee meeting minutes, and we will also see the balance of trade figures from Germany. The Bank of England Governor, Mark Carney, is also set to give a speech this afternoon and it will be interesting to see if he has anything to say about the recent Brexit discussions.
Speaking of Brexit, we recently published advice on ‘Brexit-proofing’ property purchases overseas – take a look at it here to see how to protect your money from sudden market movements.