EZ and US Economic Data Fuels Slowing Global Growth Concerns

Whilst markets across Europe traded in the red, the FTSE was a standout loser. The FTSE was weighed down on Thursday by a handful of poor results, a revival of slowing global growth concerns and a stronger pound. The UK’s leading index dived over 1%, paring all of yesterday’s gains and some more, plunging back through 7200. 

Dax supported by trade talk progress
The Dax on the other hand fared much better than the FTSE. The Dax, although in the red hovered much closer to break even, thanks to progress in US – Sino trade talks, even following dismal German manufacturing pmi figures. The German manufacturing pmi unexpectedly dropped sharply and recorded its second consecutive month below the 50 level, which separates expansion from contraction. Activity measured just 47.6 on the index, the weakest level since December 2012 and a level that indicates that activity in the manufacturing sector is slowing rapidly than what was originally thought.  

The global trade war continues to weigh on manufacturing sectors across the globe, Germany is by no means immune. Neither is the eurozone as a whole, which saw manufacturing activity contract for the first time since June 2013.

ECB contemplating starting cheap loans (again)
With weakness setting in, the ECB are unlikely to raise rates anytime soon. The minutes released from the January meeting also highlighted growing concerns from policy makers over the intensifying trade tensions and their impact on the global economy. Growth in the near term, they believe, will be weaker than previously thought. Rising interest rates is now being overshadowed by the possibility of another round of cheap loans (LTros) to support the economy, which is in danger of grinding to a halt. A decision could well be taken regarding LTros at the next ECB meeting on March 7th. The euro was holding up well versus the dollar following the slew of Eurozone data and the ECB minutes, but that was also thanks to dollar weakness.

Dire US data 
Weakness isn’t just evident in Europe. Weak data from the US cemented global growth concerns. A slew of data released from the US across the afternoon failed to hit the mark and sent a shiver through the markets. US durable goods orders grew just 1.2% in December, well short of the 1.7% forecast. US manufacturing activity, homes sales and Philadelphia Fed Business outlook all surprised to the downside. As a result, Wall Street dived lower on the open, snapping a four-day winning streak. The dollar was also losing ground versus a basket of currencies.