Summary for the 8th of March 2019


The ECB has downward adjusted the GDP growth and inflation considerably, comparing with what it has forecasted in December. For 2019, the GDP  growth is downward adjusted by 0.6% to 1.1%, same level as what the OECD has forecasted of 1%.  President of the European Central Bank, Mario Draghi, states that the economic slowdown was partly due to the global activity and slowdown in external demand by some country and sector-specific factors. The ECB acknowledges that the external, temporarily factors will be slowing down the economy longer than previously anticipated. The ECB is expecting the economic growth to increase in the years to come but the risks for a downturn are still great, and these risks are mostly due to persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets.

Even though the unemployment in the Eurozone is falling and the hourly earnings are rising, the inflation forecast has been downward adjusted greatly. The economic slowdown will make it takes longer for the effect of higher hourly earnings to boost the inflation. The downward adjustment in inflation forecast is also because of the falling energy prices, but the forecast for the core inflation (excluding food and energy prices) has been downward adjusted to 1.2% (2019), 1.4%(2020) and 1.6%(2021).

The ECB hasn’t  change the main key interest rates (interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility) at the meeting. The ECB also introduces new series of longer term refinancing operations for banks. A quarterly targeted longer-term refinancing operations, TLTRO III, will be launched, starting in September 2019 and ending in March 2021. The full details of this refinancing program aren’t yet published.

Government bond yields fell greatly after the ECB meeting. Even though the ECB is introducing new financing program to banks, the signals about longer period of negative interest rates are considered bad news for banks operating margins.

Trade balance from China shows the biggest decline in Chinese export in three years. The Asian stock markets fell greatly after the release of the numbers.

Indices for 8th of March. Even though Japan’s GDP number was better than expected, the numbers from Chinese trade balance had made a negative close in the Asian stock markets.

Dow: -0.8% (7th of March)
S&P 500: -0.8% (7th of March)
Nasdaq: -1.1%(7th of March)
Nikkei: -2.1%  (8th of March)
Chinese indices: -3.1% (8th of March)
STOXX Europe 600 Index: -0.89% (8th of March)

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