A slowdown in Chinas economy knocks European indices

Fiona Cincotta
By :  ,  Senior Market Analyst
Chinese domestic indicators continue showing an economy that is in slowdown mode and Chinese politicians and foreign investors are becoming increasingly worried. Although some of the slowdown can be blamed on the spat between China and the US over tariffs a larger part has to do with the internal dynamics of the Chinese economy, which is simply going down a gear after almost two decades of rapid expansion. The government is looking into providing support for failing businesses but has ruled out an all-out financial bailout as seen in the past.

European indices responded with a weaker start to the day but the FTSE managed to bounce back from that opening dip on the back of stronger airline shares ahead of EasyJet’s results Tuesday. Several major banks upgraded their forecasts on EasyJet although it might be too early to do that while it remains unclear how Brexit will unfold. One of the unpleasant questions the budget airline will have to address tomorrow is how it would deal with a hard Brexit which could potentially result in British planes not being allowed to fly over the EU.

Plan B

Having survived the rejection of her Brexit proposal and the subsequent no-confidence vote in her government Theresa May will now have to present her alternative to Parliament on Monday. How she will manage to get parliamentary consensus is completely unclear given that her proposal was rejected by 402 out of 650 MPs last week and her subsequent attempt to find common ground with Labour didn’t yield any results. EU politicians are not showing any more signs of willingness to cooperate than MPs and instead keep signaling that they are unwilling to agree to any more concessions for Britain. The lack of progress has weakened the pound and the currency lost 0.33% against the euro and 0.21% against the dollar.   


Davos without US representatives

The annual Davos gathering of political and business leaders will have a different flavour this year as both Donald Trump and US government representatives will be absent. Trump remains at loggerheads with Congress over the funding of the Mexican wall and there is no visible solution in sight. Although US stock markets are not showing any serious reaction to the government shutdown it is only a matter of time before this becomes critical as the shutdown includes the Treasury Department, the Justice Department and the Securities and Exchange Commission.
Related tags: May UK 100 Forex China GBP

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