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UK and Germany dodge technical recession...
- The UK and German economies both escaped falling into technical recession by registering modest expansion in Q3 after shrinking in Q2. In the UK, this was expected, in Germany it came as an unexpected surprise. Year-on-year growth remains mediocre in both (UK 1.0%, Germany 0.5%).
- The November German ZEW survey indicated Q4 GDP is likely to be weak, with the Current Conditions component languishing at -24.7; more encouragingly, the forward-looking Expectations component unexpectedly jumped to -2.1 from -22.8 the previous month.
- The US NFIB small business survey held rebounded moderately in October on signs of progress in US-China trade negotiations, although the “uncertainty” component remained at extremely elevated levels, and separately the Empire manufacturing survey dipped slightly in defiance of expectations for a small rise.
Whilst US and Chinese hard data were uninspiring
- Chinese October fixed income asset investment, industrial production and retail sales numbers all markedly undershot expectations, as did October Total Social Financing (TSF, the broadest gauge of net credit provision to the economy. However, analysts are marking their forecasts for 2019 Chinese GDP higher based on the receding threat of the December round of US tariffs being implemented.
- On Friday, the People’s Bank of China unexpectedly offered RMB200bn (net) of credit to banks via a medium-term lending facility (MLF), demonstrating their ongoing commitment to ease liquidity conditions.
Markets oscillated with each successive headline regarding the state of play in trade negotiations
- US equities eked out fresh highs this week with the S&P 500 above 3,100; however, European and Asian markets were more mixed, particularly the Hang Seng as the protests in Hong Kong intensified.
- Government bond yields retraced modestly lower from multi-month highs as sentiment turned more cautious, allowing havens such as Japanese yen and gold to stabilise after recent weakness.
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