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Bundesbank says summer’s slump in exports is expected to continue into the autumn
Germany’s economy is heading into recession after the country’s central bank warned that a slump in exports during the summer was likely to continue into the autumn.
The Bundesbank said a downturn in orders for cars and industrial equipment in the second quarter of the year was likely to continue in the third quarter, leaving the economy on the brink of a technical recession, defined as two consecutive quarters of negative GDP growth.
Rolling coverage of the latest economic and financial news as Mario Draghi expected to prepare central bank for interest rate cuts
It will be too late for the ECB’s interest rates decision, but the latest measure of German business confidence from the influential Ifo Institute shows that morale has sagged more than expected in July.
The closely followed measure fell to a reading of 95.7 – well below the consensus expectations of 97.1.
Boris Johnson is planning to set out his “priorities for government” in his first appearance as prime minister in the house of commons – at about 10:30am BST.
Perhaps he can shed some more light on what will be happening by 31 October, the Brexit deadline.
Following Business Qs, there will be one government oral statement in the @HouseofCommons today:
Central banks in spotlight amid Brexit uncertainty and growth concerns
The Bank’s reticence to raise rates has been hinted at by Gertjan Vlieghe and Silvana Tenreyro, two of the nine-member monetary policy committee.
Weaker growth prospects have come on top of concerns about Brexit, according to Martin Beck, lead UK economist at Oxford Economics, a consultancy. He expects a 9-0 vote to keep policy unchanged, saying:
The economy’s recent performance has been broadly in line with the MPC’s expectations. But public pronouncements by some committee members on downside risks have indicated a dovish shift around the pace of future rate hikes.
In light of the continued failure to get a Brexit deal through Parliament, Brexit uncertainty remains a key block on action by the MPC.
The Bank of England will also be in action later this week, with a monetary policy announcement on Thursday at midday.
Anything other than a unanimous vote to keep interest rates on hold would be a shock, for fairly obvious reasons.
Trade Optimism Trumped Weak European Economic Sentiment today, says Fiona Cincotta of City Index.
She explains
Global markets bounced higher on Tuesday as optimism grows over a US – Sino trade deal. A strong Asian session spilled into Europe, although markets pared gains as Wall Street opened owing to increasing tech concerns.
US and China extending trade talks for another day has been interpreted as a positive sign by the markets. Whilst no reason was given for the extension, Trump’s tweet that the talks “were going very well” was sufficient to lift sentiment boosting appetite for riskier assets such as stocks, whilst safe haven gold declined.
With US and China working to resolve their issues, the Fed promising to remain flexible and the US economy firing on all cylinders it is easy to see why sentiment is on the up. Obviously, this is not the end of US – China trade tensions by a long shot, ad there will almost certainly be further bumps and twists along the way but for now the markets are happy with the slow steady progress which it perceives has been achieved.
This comes hot on heels of downbeat German factory orders, which dropped by -4.3% in November. These are the latest signs that the eurozone economy is slowing, as trade tensions sap momentum for the powerhouse of Europe.
Britain’s FTSE 100 index of top shares has closed 50 points higher at 6861 points, a gain of 0.75% today.
Optimism that Beijing and Washington are making progress in their trade negotiations lured investors into buying shares, following the recent sell off.