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)

This post is sponsored by my video course in Portfolio Analysis, check it out if you are interested:
Quick and Easy Portfolio Analysis Video Course  (Skillshare)
Quick and Easy Portfolio AnalysisVideo Course  (Udemy)
and Facebook page for other information:
Quick&Easy Financial Economics


Comments

Post a Comment

Popular posts from this blog

Summary for the 2nd of October -Weaker manufacturing outlook

Last week’s flash PMI estimates for the EU area and yesterday’ final PMI numbers are indicating that the weakening in the manufacturing sector isn’t country specific, but rather the weakening is across countries. The decline in Germany’s manufacturing sector is less than expected by the financial markets, while the decline in France is higher than expected. The same goes for Spain and Italy. The UK’s PMI index has increased by 0.9 to 48.3 and is more than expected, though 48.3 still indicates a weaker outlook. The US Manufacturing PMI has increased to 51.1 while the ISM index declines by 1.3 percent to 47.8, the lowest value since 2009. Despite weakening activities in the manufacturing sector for the developed countries, for the developing countries the outlook is still positive. The global PMI value in the manufacturing sector has risen from August to September. Past months’ decline has been due to weaker growth in the global trade. The WTO has updated its global trade forecast ...
Read more

Summary for the 15th of October

China’s balance of trade shows a fall in exports by 3.2 percent, comparing to a year ago and the imports fall by 8.5 percent, the first fall since May this year. China is the largest contributor to world economic growth, through the weaker imports, China’s economic decline is affecting the rest of the world economy, such as the Euro area. The Euro area’s industrial production for  August has risen by a little more than the markets have expected. The industrial production in the Euro area has been weakening since the start of 2018. Finland is currently holding the council of the EU presidency. At a press conference with the European Council President elect, Charles Michel, the Finnish prime minister, Antti Rinne, says that The EU needs more time to reach a Brexit agreement. Boris Johnson is hoping to seal a Brexit deal before the EU summit on Thursday, so that he will be able to present it to the British Parliament on Saturday for approval, in doing so, he won’t need to postpo...
Read more

Summary for the 21st of October Brexit drama

On Saturday, the British parliament is withholding the final decision of the revised Brexit deal and forcing Boris Johnson to ask the European Council for an extension to the 31 st of January. Instead the parliament has greed on Oliver Letwin’ amendment, which states that there wont be a no deal Brexit until the parliament has agreed on the revised Brexit deal this week. And on Saturday night, Boris Johnson has sent an unsigned letter to the European Council asking for a Brexit delay as well as a personal letter to the Council asking the EU leaders not to delay Brexit. The US stock exchange has closed in negative on Friday after Johnson & Johnson has to recall 33 000 bottles of baby powder in the US after health regulators found trace amounts of asbestos in a bottle purchased online. Boeing has admitted that two of its employers in 2016 misled the FAA about the 737 Max and its technical system. Weaker than expected Chinese economic indicators also contributes to the negative...
Read more