Summary for the 25th of March 2019


Manufacturing PMI (flash estimate) from Germany showed a weaker than expected value. The market expectations were of 48, but the result was 44.7, thus confirming that German industry is in a recession. The value was the lowest since July 2012, and the decline was the sharpest since June 2011. The index for production and employment fell more than the main index did. Index for new orders fell to 40, while index for new export orders fell below 40, lowest value since the financial crisis. This shows that there are external factors that have contributed most to the slow down of the German’s industry.

China’s economic development has a high correlation with the development in the Eurozone, when there is a slowdown in the Chinese’s economy, as it has been the past 6 months, the economy in the Eurozone, also slows down. Also the slowdown in the UK’s economy due the prolonged Brexit uncertainty, can also have contributed negatively to the Eurozone economy.

Even though German’s industry has slowed down, looking at the Eurozone as a whole, the Eurozone economy is still in expansion. Eurozone PMI fell, but still over the value of 50.

Germany’s 10 years treasury yield fell below zero for the first time in two years due to the released PMI numbers.

The US yield curve, which plots bond yields from shortest to highest maturity has inverted on Friday. The first time since 2007. This is usually a signal of a downturn in the economy is closing in. Usually the economy takes a long time before it actual is in a downturn after the signal.

Also, a slowdown in the housing market is often a signal of a slowdown in the economy. The numbers for US existing home sales released on Friday showed a rebound in February. Sales rose by 11.8% from previous month, after a fall of 1.4% in January. The sales in the housing market is thus back to the level of March 2018.

Indices for 25th of March: The decline in the German’s industry together with the inverted yield curve have led to decline of stock exchanges in the US on Friday.

Dow: -1.8% (22nd of March)
S&P 500: -1.9% (22nd of March)
Nasdaq: -2.5% (22nd of March)
Nikkei: -3% (25th of March)
Chinese indices: -2.1% (25th of March)
STOXX Europe 600 Index: -0.45% (25th of March)

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